If you're an investor, expat, or business owner with assets in the United Kingdom or Italy, understanding the United Kingdom Italy capital gains tax comparison is essential for smart financial planning. Both countries tax profits on the sale of assets—from shares and property to business interests—but they do so in strikingly different ways.
In this comprehensive guide for the 2025/2026 tax year, we'll examine which country has lower capital gains tax, how each system works, and what strategies you can use to minimize your liability. Whether you're relocating between London and Milan or simply diversifying your international portfolio, the details below will give you a clear picture of what to expect.
How Capital Gains Tax Works in the United Kingdom (2025/2026)
The UK's capital gains tax (CGT) system is relatively straightforward. When you sell or dispose of an asset that has increased in value, you pay tax on the profit (the "gain"). CGT is separate from income tax, though your income tax band influences the CGT rate you pay.
Key UK CGT Rates for 2025/2026
Following the changes announced in the Autumn Budget 2024, the main UK CGT rates increased from October 30, 2024, and remain in effect for the 2025/2026 tax year:
- Basic-rate taxpayers: 18% on most assets (up from 10%)
- Higher-rate and additional-rate taxpayers: 24% on most assets (up from 20%)
- Residential property (non-main-residence): 18% for basic-rate taxpayers and 24% for higher-rate taxpayers
- Business Asset Disposal Relief (formerly Entrepreneurs' Relief): The rate rose to 14% from April 6, 2025, and is scheduled to rise further to 18% from April 2026. The lifetime limit remains £1 million.
UK Annual Exempt Amount
Every UK tax resident receives an annual exempt amount (AEA), which is the amount of gains you can realize tax-free each year. For 2025/2026, this stands at £3,000 per individual. This is a dramatic reduction from the £12,300 allowance that applied just a few years ago.
Who Pays UK CGT?
- UK residents pay CGT on worldwide gains.
- Non-residents generally only pay UK CGT on the disposal of UK residential property and, since April 2019, UK commercial property and land.
Use our United Kingdom Capital gains tax Calculator to estimate your exact liability based on your personal circumstances.
How Capital Gains Tax Works in Italy (2025/2026)
Italy takes a different approach to taxing capital gains. Gains can be classified as either redditi diversi (miscellaneous income) or incorporated into overall taxable income, depending on the type of asset and the taxpayer's status.
Key Italian CGT Rates for 2025/2026
- Financial assets (shares, bonds, funds): A flat 26% substitute tax applies to most capital gains from financial instruments. However, gains from Italian government bonds and equivalent EU/EEA bonds are taxed at a reduced rate of 12.5%.
- Qualified shareholdings: Since 2019, gains from qualified shareholdings (significant participations) held by individuals are also generally subject to the 26% flat tax, aligning them with non-qualified shareholdings.
- Real property: Gains on real estate sold within five years of purchase are generally taxed as ordinary income (at progressive IRPEF rates up to 43%) or at an optional 26% substitute tax. Sales after five years are typically exempt (with exceptions for building land).
- Business assets: Gains related to business activities may be taxed under the progressive IRPEF system.
Italian Progressive IRPEF Rates (for reference)
When capital gains are folded into ordinary income, Italy's progressive rates for 2025 apply:
| Taxable Income (EUR) | Rate |
|---|---|
| Up to €28,000 | 23% |
| €28,001 – €50,000 | 33% |
| €50,001 – €100,000 | 43% |
| Over €100,000 | 43% |
Note: Italy introduced a three-bracket system in 2024 which was extended, and further reforms for 2025/2026 may adjust these bands. Always verify current rates.
Who Pays Italian CGT?
- Italian tax residents are taxed on worldwide capital gains.
- Non-residents are generally taxed only on gains from Italian-source assets (e.g., Italian real estate, shares in Italian companies under certain conditions).
Estimate your Italian tax liability with our Italy Capital gains tax Calculator.
United Kingdom vs Italy: Direct Rate Comparison
Let's put the two systems side by side to answer the key question: which country has lower capital gains tax?
| Feature | United Kingdom (2025/2026) | Italy (2025/2026) |
|---|---|---|
| Standard CGT rate (shares/financial assets) | 18% (basic rate) / 24% (higher rate) | 26% flat rate |
| Government bond gains | 18% / 24% | 12.5% |
| Residential property gains | 18% / 24% | 26% (substitute tax) or progressive IRPEF if < 5 years; exempt if > 5 years |
| Annual tax-free allowance | £3,000 | None (no general exemption) |
| Entrepreneurial relief | 14% (BADR, up to £1m lifetime) | No direct equivalent |
| Crypto assets | 18% / 24% (standard CGT rates) | 26% on gains exceeding €2,000 |
Key Takeaway on Rates
For basic-rate UK taxpayers, the UK is typically cheaper at 18% compared to Italy's 26% flat rate on financial assets. However, higher-rate UK taxpayers face 24%, which is still slightly lower than Italy's 26%, making the UK marginally more favorable even at the top end for most investment gains.
The exception is Italian government bonds, where Italy's 12.5% rate is significantly lower than any UK rate.
For property, Italy's system can be far more generous—if you hold a property for more than five years, the gain is usually completely tax-free, whereas the UK charges 18–24% on second properties regardless of how long you've held them.
Practical Examples: UK vs Italy Capital Gains Tax
Let's work through some concrete scenarios to illustrate how the two systems compare in practice.
Example 1: Selling Shares Worth £50,000 in Profit
UK (higher-rate taxpayer):
- Gain: £50,000
- Less annual exempt amount: £3,000
- Taxable gain: £47,000
- Tax at 24%: £11,280
Italy:
- Gain: €58,500 (approximate equivalent at £1 = €1.17)
- No annual exemption
- Tax at 26%: €15,210 (≈ £13,000)
Winner: United Kingdom — saves roughly £1,720 in this scenario.
Example 2: Selling a Second Home After 6 Years, £100,000 Gain
UK (higher-rate taxpayer):
- Gain: £100,000
- Less AEA: £3,000
- Taxable gain: £97,000
- Tax at 24%: £23,280
Italy (property held > 5 years):
- Gain: €0 tax (exempt from CGT)
Winner: Italy — the saving is dramatic. Holding property long-term in Italy can eliminate capital gains tax entirely.
Example 3: Selling Italian Government Bonds, €30,000 Gain
UK resident holding Italian bonds:
- Taxed in UK at 18–24% (depending on band)
- At 24%: £6,150 (on £25,641 equivalent)
Italian resident:
- Taxed at 12.5%: €3,750
Winner: Italy — the preferential rate for government bonds is a clear advantage.
Try running your own numbers with our United Kingdom Capital gains tax Calculator and Italy Capital gains tax Calculator.
Double Taxation Treaty: UK–Italy
The United Kingdom and Italy have a double taxation agreement (DTA) in force, which is critical for anyone with tax obligations in both countries. Here's what you need to know:
- Shares and financial assets: Under the treaty, capital gains from the sale of shares are generally taxable only in the country of residence of the seller. This means if you're a UK resident selling Italian shares, you'll typically only pay UK CGT.
- Real property: Gains from the sale of immovable property (real estate) can be taxed in the country where the property is located. If you're a UK resident selling Italian property, Italy has the primary right to tax the gain, but you can claim a foreign tax credit in the UK to avoid double taxation.
- Business assets: More complex rules apply to gains attributable to a permanent establishment.
Common Mistake to Avoid
Many expats assume that because a DTA exists, they won't pay tax in either country. This is incorrect. A DTA allocates taxing rights and provides relief from double taxation—it doesn't eliminate tax. You must still report gains in your country of residence and claim the appropriate credit or exemption.
Always check your overall tax position using both our United Kingdom Income Tax Calculator and Italy Income Tax Calculator to understand how capital gains interact with your broader income.
Special Regimes and Planning Opportunities
Italy's Flat Tax Regime for New Residents
Italy offers a highly attractive flat tax regime (known as the regime forfettario per i neo-residenti) for high-net-worth individuals who transfer their tax residence to Italy. Under this scheme:
- You pay a flat €200,000 per year substitute tax on all foreign-sourced income and gains (with an additional €25,000 per qualifying family member).
- This can be extraordinarily beneficial for individuals with large international investment portfolios.
- The regime lasts for up to 15 years.
For someone with substantial capital gains from non-Italian assets, this regime could reduce the effective tax rate to a fraction of what they'd pay under standard rules in either the UK or Italy.
UK: Bed and ISA / Bed and SIPP Strategies
UK investors can shelter future gains by:
- Selling assets and realizing gains within the £3,000 annual exempt amount.
- Repurchasing within an ISA (Individual Savings Account) where future gains grow tax-free.
- Contributing to a SIPP (Self-Invested Personal Pension) for tax-deferred growth.
These strategies have no direct Italian equivalent, making them a unique UK advantage for long-term planning.
UK Non-Domicile Changes (2025/2026)
The UK abolished the traditional non-domicile (non-dom) remittance basis from April 6, 2025, replacing it with a new residence-based regime. New arrivals to the UK who haven't been UK tax resident in the previous 10 years can benefit from a four-year foreign income and gains exemption. After four years, worldwide gains become fully taxable. This is a significant change and may influence relocation decisions between the UK and Italy.
Frequently Asked Questions
Which country has lower capital gains tax overall?
For most financial asset sales, the United Kingdom has lower rates (18–24%) compared to Italy's flat 26%. However, Italy wins on long-term property gains (exempt after 5 years) and government bonds (12.5%).
Do I have to pay capital gains tax in both countries?
Not usually. The UK–Italy double taxation treaty prevents double taxation. You'll generally pay in one country and claim a credit in the other. However, you may still need to report in both jurisdictions.
Is there an annual tax-free allowance for capital gains in Italy?
No, Italy does not offer a general annual exempt amount for capital gains. The UK provides a £3,000 annual exempt amount for 2025/2026, though this is much smaller than in previous years.
How are cryptocurrency gains taxed?
In the UK, crypto is taxed at standard CGT rates (18–24%) with the £3,000 annual allowance. In Italy, crypto gains are taxed at 26% on gains exceeding a €2,000 threshold per tax year (following 2023 reforms that were extended into 2025). Italy initially proposed increasing this to 42%, but the increase was scaled back.
What about losses?
Both countries allow you to offset capital losses against gains. In the UK, unused losses can be carried forward indefinitely. In Italy, losses on financial assets can be carried forward for four years.
Conclusion: UK or Italy for Capital Gains Tax?
The United Kingdom Italy capital gains tax comparison reveals that neither country is universally cheaper—it depends on the type of asset and your personal circumstances:
- For stock market investors, the UK is generally more favorable, especially for basic-rate taxpayers (18% vs 26%).
- For property investors, Italy's exemption on sales after five years is a powerful advantage that the UK simply cannot match.
- For government bond investors, Italy's 12.5% rate is the clear winner.
- For high-net-worth individuals, Italy's flat tax regime for new residents can slash the effective rate on foreign gains to near zero.
- For entrepreneurs, the UK's Business Asset Disposal Relief at 14% (rising to 18% in 2026) still offers a discount, though it's becoming less generous.
Ultimately, the best strategy depends on your asset mix, residency status, and long-term plans. We recommend modeling your specific situation using our United Kingdom Capital gains tax Calculator and Italy Capital gains tax Calculator to get personalized estimates.
This article is for informational purposes only and does not constitute tax advice. Tax laws change frequently; consult a qualified tax professional for advice specific to your situation.