Capital Gains Tax (CGT) is charged when you sell or dispose of an asset that has risen in value, on the profit you make rather than the full amount you receive. Every individual has an annual exempt amount of £3,000 for the 2025/26 and 2026/27 tax years, so only gains above that are taxed. The main rates are 18% for basic rate taxpayers and 24% for higher rate taxpayers, and the rate you pay depends on your other income.
CGT catches a wide range of assets, including shares that are not held in an ISA, second homes, buy to let property, business assets and valuable personal possessions worth more than £6,000. You do not usually pay it when you sell your only or main home, because that is covered by Private Residence Relief. The tax applies to the gain, which is broadly the sale price less what you paid and less certain allowable costs such as stamp duty or improvement works. For a fuller picture of how this fits with your other filing duties, see our accountancy and tax guide.
What is the Capital Gains Tax allowance for 2025/26 and 2026/27?
The annual exempt amount is the slice of gains you can make each tax year before any CGT is due. For both 2025/26 and 2026/27 it is £3,000 for individuals. Trusts generally get half that figure, at £1,500. The allowance cannot be carried forward, so if you do not use it in a given year it is simply lost. Married couples and civil partners each have their own £3,000, and assets can often be transferred between them without triggering a charge, which can help make full use of both allowances.
What are the current Capital Gains Tax rates?
The main rates changed on 30 October 2024. For most assets, including shares, the rate is now 18% for gains that fall within the basic rate band and 24% for gains above it. This means a basic rate taxpayer pays 18% and a higher or additional rate taxpayer pays 24%. Residential property that is not your main home, such as a second home or a buy to let, is also taxed at 18% and 24%, so the property and non property rates are now aligned.
How do gains stack on top of my income?
To work out which rate applies, you add your taxable gains on top of your taxable income for the year. Any part of the gain that still sits inside the basic rate band is taxed at 18%, and any part that pushes you above the basic rate threshold is taxed at 24%. A single gain can therefore be split across both rates. For example, if you have modest income and a large gain, part of it may be taxed at 18% and the rest at 24% once your combined figure crosses into the higher rate band.
Is there a lower rate for selling a business?
Yes. Business Asset Disposal Relief gives a reduced rate on qualifying disposals, such as selling all or part of a trading business or shares in your own trading company, subject to conditions on ownership and your role. The relief is applied at 14% for disposals in 2025/26 and rises to 18% for disposals from 6 April 2026, up to a lifetime limit of £1 million of qualifying gains. The rules on what qualifies are detailed, and getting them right matters, so it is worth reading our guide to Business Asset Disposal Relief before you sell.
How do I report and pay Capital Gains Tax?
There are two routes, depending on what you sold. If you sell UK residential property that is not your main home and there is tax to pay, you must report the gain and pay the CGT within 60 days of completion, using a separate online return. This is a strict deadline and late filing brings penalties and interest, so plan for it before you complete. Our guide to the 60 day property return walks through the process.
For other gains, such as shares or a second property already covered by the 60 day return, you report through your annual Self Assessment tax return. You keep records of your purchase and sale figures and any allowable costs, then report the totals in the capital gains section. Even where no tax is due, you may still need to report gains if the amounts you dispose of are large relative to the allowance, so keep good records throughout the year.
Getting Capital Gains Tax right
CGT calculations can be more involved than they first appear, particularly where reliefs, part disposals or share pools are concerned. Careful record keeping and taking advice before a major sale usually pays for itself, both in tax saved and in avoiding mistakes that draw HMRC attention.
Capital gains are a common area for HMRC enquiries, because valuations, reliefs and reporting deadlines all leave room for questions. If HMRC opens an investigation, the cost of your accountant defending you can run into thousands even when nothing is wrong. A Solar Protect tax investigation policy covers up to £100,000 of your accountant’s fees with no excess, so you can respond properly without worrying about the bill. Get a quote to protect yourself today.
Reviewed by Matthew Bartlett, Director, Solar Protect. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.