Capital Gains Tax in the UK: Rates, Allowances, and What Triggers a Charge

Capital Gains Tax (CGT) applies when you sell or dispose of an asset at a profit — shares, property, businesses, and other valuable items. It is not the same as income tax, though it interacts with it: your income tax position in the year of disposal determines which CGT rate applies. Understanding CGT matters increasingly for self-employed people who own property, hold shares, or are planning to sell their business.

What triggers Capital Gains Tax

CGT is charged on gains (profits) arising from the disposal of a chargeable asset. A disposal includes:

Selling an asset — the most obvious trigger
Giving an asset away — gifting an asset is a disposal at market value for CGT purposes (even if no money changes hands)
Exchanging an asset — swapping shares in a takeover, for example
Receiving compensation — an insurance payout for a destroyed asset can trigger CGT on the gain
Selling part of an asset — selling part of a plot of land you own

What is not CGT:

Selling your main home (usually exempt under Private Residence Relief)
Selling personal possessions worth less than £6,000 (chattel exemption)
Gains within an ISA (tax-free)
Gains within a pension (tax-free within the wrapper)

Chargeable assets

Common chargeable assets include:

Investment property (buy-to-let, second homes)
Shares and securities held outside an ISA
Cryptocurrency (treated as an asset for CGT purposes)
Business assets (goodwill, plant and machinery not within a business)
Fine art, jewellery, and collectibles worth over £6,000
Business interests on sale or closure

The Annual Exempt Amount: £3,000

Every UK taxpayer has an Annual Exempt Amount (AEA) — gains within this allowance are completely tax-free each year. For 2026/27, the AEA is £3,000. This is substantially lower than the £12,300 available before 2023/24, having been cut in stages.

You cannot carry forward an unused AEA to a future year — it is "use it or lose it" annually.

If your gains across the year total £3,000 or less (after deducting allowable losses), there is no CGT to pay and no need to report the gains on your Self Assessment return.

CGT rates for 2026/27

CGT rates depend on two factors: the type of asset and your income level.

Residential property (that is not your main home):

Basic rate taxpayers: 18%
Higher rate taxpayers: 24%

Other assets (shares, business assets, cryptocurrency, etc.): Following the October 2024 Budget, the rates increased:

Basic rate taxpayers: 18%
Higher rate taxpayers: 24%

Note: Before the October 2024 Budget, the rates were 10% (basic rate) and 20% (higher rate) for non-residential assets. The Budget harmonised the non-residential rates upward to match residential property rates. Always check current rates as these can change.

How income affects your CGT rate: CGT sits on top of your income. If your income fills the basic rate band (£12,570–£50,270), any gains are taxed at the higher rate. If your income leaves some basic rate band unused, the gain uses it up at the basic rate first, then any remainder is at the higher rate.

Example:

Taxable income: £38,000 (using £38,000 − £12,570 = £25,430 of the basic rate band)
Remaining basic rate band: £50,270 − £38,000 = £12,270
Capital gain: £20,000 (after AEA of £3,000 deducted = £17,000 taxable gain)
First £12,270 of gain: basic rate CGT (18%) = £2,208.60
Remaining £4,730 of gain: higher rate CGT (24%) = £1,135.20
Total CGT: £3,343.80

Calculating your gain

The gain is: Disposal proceeds − Allowable costs

Allowable costs include:

Original purchase price (or market value if inherited or gifted)
Purchase costs — Stamp Duty Land Tax, legal fees, surveyor fees
Capital improvement costs (not maintenance or repairs)
Disposal costs — estate agent fees, legal fees for the sale

What you cannot deduct:

Mortgage interest or financing costs (these are income deductions, not CGT deductions)
Maintenance and repair costs (income deductions)
Your own time

Example — property sale:

Purchase price 2018: £180,000
Stamp duty and legal fees at purchase: £6,500
Extension added 2021: £25,000
Sale price 2026: £290,000
Estate agent and legal fees on sale: £8,000
Allowable cost total: £180,000 + £6,500 + £25,000 + £8,000 = £219,500
Gain: £290,000 − £219,500 = £70,500
After AEA: £70,500 − £3,000 = £67,500 taxable gain

Private Residence Relief (your main home)

Your main home — the property where you live as your primary residence — is generally exempt from CGT under Private Residence Relief (PRR). If you've lived there throughout your ownership period, 100% of the gain is exempt.

The relief becomes partial if you:

Owned the property for periods when it wasn't your main residence (e.g., let it out, or lived elsewhere)
Let out part of the property to tenants (lettings relief applies in some cases)
Used part of the property exclusively for business purposes (which can restrict PRR)

The last nine months of ownership always qualify for PRR (previously 18 months, reduced in April 2020), even if you've moved out — to allow time for the sale to complete.

Business Asset Disposal Relief

If you sell your business or business assets, Business Asset Disposal Relief (BADR) — formerly Entrepreneurs' Relief — can apply a reduced CGT rate of 10% (since 2024) on qualifying gains up to a lifetime limit of £1 million.

To qualify, you must have owned the business for at least two years and been a director or employee for two years. The rules are detailed and the definition of "qualifying business" has specific requirements. BADR is particularly relevant for contractors closing a limited company.

Reporting and paying CGT

For residential property gains, you must report and pay CGT within 60 days of completion using HMRC's property disposal reporting service.

For all other gains, CGT is declared on your Self Assessment tax return and the tax is due by 31 January following the tax year. Gains in 2026/27 are declared in the January 2028 return.

Keep records of all asset purchases and improvements — you may need them years later to calculate a gain.

Losses

Capital losses can be deducted from gains in the same tax year. If you have more losses than gains in a year, the net loss can be carried forward to offset future gains (but not carried back). Report losses on your Self Assessment return to preserve them for future use, even if your total gains are within the AEA.