If you sell an asset in the UK for more than you paid for it, you may owe capital gains tax (CGT). Understanding how capital gains tax works in the United Kingdom is essential whether you're selling a buy-to-let property, offloading shares, or disposing of a valuable personal possession. With the annual exempt amount now significantly lower than it was just a few years ago, more people than ever are being caught by CGT.

In this guide, we break down everything you need to know about United Kingdom capital gains tax explained for the 2025/2026 tax year (6 April 2025 – 5 April 2026), including the latest rates, allowances, reliefs, reporting deadlines, and common mistakes to avoid.

What Is Capital Gains Tax?

Capital gains tax is a tax on the profit (or "gain") you make when you sell, give away, or otherwise dispose of an asset that has increased in value. It is not a tax on the total sale price — only on the gain itself.

CGT applies to a wide range of assets, including:

  • Residential and commercial property (excluding your main home in most cases)
  • Shares and investments (outside of ISAs and pensions)
  • Business assets, including goodwill
  • Personal possessions worth more than £6,000 (known as "chattels"), such as jewellery, art, and antiques
  • Cryptocurrency (Bitcoin, Ethereum, etc.)

What Is NOT Subject to CGT?

Several important exemptions mean you won't pay CGT on:

  • Your main residence (provided Private Residence Relief applies)
  • Assets held within an ISA or pension
  • UK government gilts and most corporate bonds
  • Personal possessions sold for £6,000 or less
  • Betting, lottery, and pools winnings
  • Cars (they are exempt regardless of value)
  • Assets transferred between spouses or civil partners (though the gain is deferred)

Capital Gains Tax Rates in the United Kingdom for 2025/2026

The CGT rate you pay depends on two factors: the type of asset you are disposing of and your total taxable income in the tax year. Here is how capital gains tax rates in the United Kingdom break down for 2025/2026.

CGT Rates on Most Assets (Shares, Crypto, Personal Possessions, etc.)

Income Tax Band CGT Rate (2025/2026)
Basic-rate taxpayer 18%
Higher or additional-rate taxpayer 24%

CGT Rates on Residential Property

Following changes introduced from October 2024 and continuing into 2025/2026, residential property gains are taxed at:

Income Tax Band CGT Rate on Residential Property
Basic-rate taxpayer 18%
Higher or additional-rate taxpayer 24%

These rates were aligned in the Autumn Budget 2024, meaning the previously lower rates on non-property assets have been raised to match property rates. For 2025/2026, the rates are effectively 18% and 24% across the board.

How Your Income Tax Band Affects Your CGT Rate

Your CGT rate is determined by adding your taxable gains (after the annual exempt amount) to your taxable income. If the combined total keeps you within the basic-rate band (up to £37,700 above the personal allowance for 2025/2026), you pay 18%. Any gains that push you into the higher-rate band are taxed at 24%.

Example:

Sarah has a taxable income of £40,000 and makes a capital gain of £15,000 from selling shares in the 2025/2026 tax year.

  1. Her taxable income uses up £40,000 − £12,570 (personal allowance) = £27,430 of the basic-rate band.
  2. The basic-rate band limit is £37,700, so she has £37,700 − £27,430 = £10,270 of basic-rate band remaining.
  3. Her net gain after the £3,000 annual exempt amount is £15,000 − £3,000 = £12,000.
  4. The first £10,270 is taxed at 18% = £1,848.60
  5. The remaining £1,730 is taxed at 24% = £415.20
  6. Total CGT = £2,263.80

Use our United Kingdom Capital Gains Tax Calculator to run your own numbers quickly and accurately.

The Annual Exempt Amount (Tax-Free Allowance)

Every individual gets an annual exempt amount — a tax-free allowance for capital gains each year. For 2025/2026, the annual exempt amount is:

  • £3,000 for individuals
  • £1,500 for most trusts

This is a significant reduction from the £12,300 allowance that was in place as recently as 2022/2023. The Government cut the allowance to £6,000 in 2023/2024 and then halved it again to £3,000 from 2024/2025 onwards.

Key Points About the Annual Exempt Amount

  • It cannot be carried forward — if you don't use it in a tax year, you lose it.
  • Each individual has their own allowance, so couples can potentially exempt £6,000 of gains between them.
  • It applies before calculating the tax, so you deduct £3,000 from your total net gains for the year.

Tip: With the allowance at just £3,000, consider timing your disposals across multiple tax years to maximise the use of each year's exempt amount — a strategy known as "bed and breakfasting" (though anti-avoidance rules apply to share repurchases within 30 days).

How to Calculate Your Capital Gain

Calculating your capital gain involves several steps. Here is a clear, step-by-step process:

  1. Determine the disposal proceeds — the amount you sold (or the market value if you gave it away) the asset for.
  2. Deduct the original acquisition cost — the price you paid for the asset (or its market value when you acquired it).
  3. Deduct allowable costs — these include:
    • Stamp duty paid on purchase
    • Legal and estate agent fees
    • Costs of improving the asset (but not maintenance)
    • Valuation fees required for tax purposes
  4. Deduct any applicable reliefs (see the next section).
  5. Deduct the annual exempt amount (£3,000 for 2025/2026).
  6. Apply the correct CGT rate based on your income tax band.

Practical Example: Selling a Buy-to-Let Property

James bought a buy-to-let flat in 2015 for £200,000. He sells it in August 2025 for £320,000. His costs include:

  • Purchase costs (stamp duty, solicitor fees): £7,500
  • Improvement costs (new kitchen and bathroom): £15,000
  • Selling costs (estate agent, solicitor fees): £6,000

Calculation:

Item Amount
Sale proceeds £320,000
Less: purchase price −£200,000
Less: purchase costs −£7,500
Less: improvements −£15,000
Less: selling costs −£6,000
Gross gain £91,500
Less: annual exempt amount −£3,000
Taxable gain £88,500

If James is a higher-rate taxpayer, he would pay 24% on £88,500 = £21,240 in CGT.

You can verify calculations like this using our United Kingdom Capital Gains Tax Calculator.

Key CGT Reliefs and Exemptions

Several reliefs can reduce or eliminate your CGT liability. Understanding these is crucial to ensuring you don't pay more than you need to.

Private Residence Relief (PRR)

If you sell your main home, you are usually fully exempt from CGT thanks to Private Residence Relief. However, PRR may be restricted if:

  • You let out part of the property
  • You used part of the property exclusively for business
  • You were absent from the property for extended periods
  • You have nominated a different property as your main residence

The final nine months of ownership are always covered by PRR, even if you weren't living there.

Business Asset Disposal Relief (BADR) — Formerly Entrepreneurs' Relief

If you are selling a business, shares in your personal trading company, or business assets, you may qualify for Business Asset Disposal Relief. This provides a reduced CGT rate of 14% on qualifying gains up to a lifetime limit of £1 million for the 2025/2026 tax year.

Note that this rate is scheduled to increase to 18% from April 2026.

To qualify, you generally need to:

  • Have owned the business or shares for at least two years
  • Be a sole trader, business partner, or hold at least 5% of shares and voting rights
  • Be an officer or employee of the company (for share disposals)

Investors' Relief

Similar to BADR, Investors' Relief applies to qualifying shares in unlisted trading companies. The reduced rate is 14% for 2025/2026 (rising to 18% from April 2026), with a lifetime limit of £10 million.

Holdover Relief (Gift Relief)

When you give away business assets or assets where Inheritance Tax is chargeable, you and the recipient can jointly elect to "hold over" the gain. This means no CGT is payable at the time of the gift — instead, the recipient takes on the asset at your original base cost.

Losses and Loss Relief

Capital losses can be set against gains in the same tax year. If losses exceed gains, the surplus can be carried forward indefinitely to offset future gains. However, losses must be reported to HMRC to be usable.

  • Current-year losses are applied before the annual exempt amount.
  • Brought-forward losses are only applied to reduce gains down to the annual exempt amount — you cannot create an artificial loss.

Reporting and Payment Deadlines

Getting the timing right is critical, especially for property disposals, where different rules apply.

UK Residential Property: The 60-Day Rule

If you sell a UK residential property that is subject to CGT (i.e., not covered by Private Residence Relief), you must:

  1. Report the disposal to HMRC within 60 days of completion.
  2. Pay the estimated CGT within the same 60-day window.

This is done through HMRC's "Report and Pay Capital Gains Tax on UK Property" online service. You will still need to report the disposal on your Self Assessment tax return at the end of the year, and any overpayment or underpayment will be adjusted.

All Other Assets

For disposals of shares, crypto, and other non-property assets, you report and pay CGT through your Self Assessment tax return. Key deadlines for the 2025/2026 tax year:

  • Online filing deadline: 31 January 2027
  • Payment deadline: 31 January 2027
  • Paper filing deadline: 31 October 2026

Do You Need to Report If You Made a Loss?

You should report capital losses to HMRC even if you have no tax to pay, so that the losses are registered and available to offset future gains.

CGT for Non-Residents

Non-UK residents are subject to CGT on disposals of:

  • UK residential property (since April 2015)
  • UK commercial property (since April 2019)
  • UK land

Non-residents are generally not subject to UK CGT on the disposal of shares in UK companies (unless the company derives 75% or more of its value from UK land — the "property-rich company" rules).

Double Taxation Agreements

The UK has an extensive network of double taxation agreements (DTAs) with over 130 countries. If you are a tax resident in another country and dispose of UK assets, a DTA may:

  • Give the right to tax the gain to your country of residence instead of the UK
  • Allow you to claim a credit for UK CGT paid against tax in your home country
  • Provide specific rules for property gains (most DTAs allow the country where the property is located to tax the gain)

Always check the relevant DTA and consult a cross-border tax specialist if you are a non-resident with UK assets.

To understand how your capital gains interact with your overall UK income, try our United Kingdom Income Tax Calculator.

Common Mistakes and Misconceptions

Avoiding these frequent errors can save you significant money and stress:

  1. Forgetting the 60-day property reporting deadline. Late filing incurs penalties of £100 initially, escalating for longer delays, plus interest on unpaid tax.
  2. Assuming your main home is always exempt. If you've let the property, used it for business, or been absent for long periods, your relief may be restricted.
  3. Ignoring crypto disposals. HMRC treats cryptocurrency as property for CGT purposes. Every disposal — including swapping one crypto for another — is a taxable event.
  4. Not claiming allowable costs. Many people forget to deduct improvement costs, professional fees, and stamp duty, all of which reduce the taxable gain.
  5. Selling and repurchasing shares within 30 days. The "bed and breakfasting" anti-avoidance rule (also known as the 30-day rule) means HMRC will match the sale with the repurchase, nullifying any crystallised loss or gain.
  6. Not reporting losses. Unreported losses cannot be carried forward. Always report them, even if there is no tax to pay.
  7. Confusing revenue and capital. If you buy and sell assets frequently (e.g., property trading), HMRC may treat your profits as income rather than capital gains, which could result in higher tax and National Insurance.

Frequently Asked Questions

How much can I earn from capital gains tax-free in 2025/2026?

The annual exempt amount for individuals is £3,000 for the 2025/2026 tax year. Gains up to this amount are tax-free.

Do I pay capital gains tax when I transfer assets to my spouse?

No. Transfers between spouses and civil partners living together are treated as taking place at "no gain, no loss." However, from 6 April 2023, transfers following separation must occur within three years of separation (or by the later of that date and a reasonable time after a court-approved financial agreement).

Is inheritance subject to capital gains tax?

No. When you inherit an asset, you acquire it at its probate value (market value at the date of death). There is no CGT on the inheritance itself. However, if you later sell the asset for more than its probate value, CGT may apply on the gain from that point.

Do I need to pay CGT on ISA or pension withdrawals?

No. Gains within ISAs and registered pensions are completely exempt from capital gains tax.

Can I offset my capital losses against income?

Generally, no. Capital losses can only be offset against capital gains. The main exception is losses on shares in qualifying trading companies under the Enterprise Investment Scheme (EIS), which can be set against income tax.

Conclusion: Key Takeaways for 2025/2026

Capital gains tax in the United Kingdom has become more significant for a wider range of taxpayers following the reduction in the annual exempt amount and the alignment of CGT rates at 18% and 24%. Here are your key takeaways:

  • The annual exempt amount is just £3,000 — plan disposals carefully across tax years.
  • CGT rates are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers on virtually all assets.
  • Business Asset Disposal Relief offers a 14% rate on qualifying gains up to the £1 million lifetime limit (rising to 18% from April 2026).
  • Report and pay CGT on UK residential property within 60 days of completion.
  • Claim all allowable costs to reduce your taxable gain.
  • Report losses to HMRC even if there is no tax to pay.
  • Non-residents are subject to UK CGT on UK property and land disposals.

Use our United Kingdom Capital Gains Tax Calculator to estimate your liability for 2025/2026 and plan your disposals effectively. If your situation involves multiple asset types or cross-border elements, use our United Kingdom Income Tax Calculator alongside to see the full picture of your UK tax position.

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.