If you sell an asset in the United Kingdom for more than you paid for it, you may owe United Kingdom capital gains tax (CGT). Whether you're disposing of a second property, selling shares, or transferring business assets, understanding how capital gains tax in the United Kingdom works is essential to managing your finances and staying compliant with HMRC.
This complete guide covers all the United Kingdom tax rates 2025/2026, thresholds, reliefs, deadlines, and reporting requirements you need to know. We'll also walk through practical examples so you can see exactly how CGT is calculated in the real world.
What Is Capital Gains Tax in the United Kingdom?
Capital gains tax is a tax on the profit (or "gain") you make when you sell or dispose of an asset that has increased in value. It is the gain that is taxed, not the total amount of money you receive.
A "disposal" includes:
- Selling an asset (e.g., shares, property, or valuables)
- Giving an asset away as a gift
- Transferring an asset to someone else
- Receiving compensation or an insurance payout for an asset
- Swapping an asset for something else
Importantly, CGT only applies to certain assets. Your main home (principal private residence) is usually exempt, and there are several other reliefs and exemptions explored below.
Who Pays CGT?
You may need to pay capital gains tax in the United Kingdom if you are:
- UK resident – You are liable on gains from worldwide assets.
- Non-UK resident – You are generally only liable on gains from UK residential property (and certain other UK land disposals) or assets used in a UK trade carried on through a UK branch or agency.
- Temporarily non-resident – If you leave the UK for fewer than five full tax years, gains realised while abroad may be taxed on your return under the temporary non-residence rules.
Trusts and estates of deceased persons can also be liable for CGT, although the rules differ.
United Kingdom Capital Gains Tax Rates for 2025/2026
The 2025/2026 tax year runs from 6 April 2025 to 5 April 2026. CGT rates in the UK depend on two key factors: the type of asset you are disposing of, and your overall taxable income.
CGT Rates on Most Assets (Non-Property)
For assets such as shares, personal possessions, and other investments:
| Your Income Tax Band | CGT Rate 2025/2026 |
|---|---|
| Basic rate taxpayer | 18% |
| Higher or additional rate taxpayer | 24% |
CGT Rates on Residential Property
For residential property that is not your main home (e.g., buy-to-let property, second homes):
| Your Income Tax Band | CGT Rate 2025/2026 |
|---|---|
| Basic rate taxpayer | 18% |
| Higher or additional rate taxpayer | 24% |
Following the changes introduced in the Autumn Budget 2024 and taking effect from 6 April 2025, the lower rate for residential property gains remains 18% and the higher rate is 24%. Meanwhile, rates on other assets were increased from 10%/20% to 18%/24% respectively, meaning all chargeable gains are now taxed at the same rates regardless of asset type.
How Your Income Tax Band Affects Your CGT Rate
Your CGT rate depends on the amount of taxable income you have. Here's how it works:
- Calculate your total taxable income for the year (salary, rental income, etc.).
- Deduct your personal allowance (£12,570 for 2025/2026).
- Determine how much of your basic rate band (up to £37,700) remains unused.
- Your capital gains (after the annual exempt amount) fill up the remaining basic rate band at 18%.
- Any gains exceeding the remaining basic rate band are taxed at 24%.
Use our United Kingdom Capital Gains Tax Calculator to see exactly how much CGT you might owe based on your income and gains.
Annual Exempt Amount (Tax-Free Allowance) for 2025/2026
Every individual in the UK has an annual exempt amount (AEA) – a tax-free allowance for capital gains. For the 2025/2026 tax year:
- Individuals: £3,000
- Trusts: £1,500
This means the first £3,000 of your total capital gains in the tax year is tax-free. Only gains above this threshold are subject to CGT.
The AEA has been significantly reduced in recent years. It was £12,300 in 2022/2023, dropped to £6,000 in 2023/2024, and fell further to £3,000 from 2024/2025 onwards. This frozen lower level remains in place for 2025/2026, meaning more taxpayers than ever are likely to have a CGT liability.
Key point: The annual exempt amount cannot be carried forward. If you don't use it, you lose it.
How to Calculate Capital Gains Tax: Step-by-Step
Calculating your capital gains tax in the United Kingdom involves several steps. Here's a clear breakdown:
Step 1: Determine the Gain
Gain = Disposal proceeds − Allowable costs
Allowable costs include:
- The original purchase price of the asset
- Costs of buying and selling (e.g., solicitor's fees, estate agent's fees, Stamp Duty Land Tax on the purchase)
- Costs of improving the asset (but not maintenance costs)
Step 2: Apply Any Reliefs
Deduct any applicable reliefs, such as Private Residence Relief, Business Asset Disposal Relief, or losses brought forward (see below).
Step 3: Deduct the Annual Exempt Amount
Subtract the £3,000 AEA from your net gains.
Step 4: Calculate the Tax
Apply the appropriate CGT rate (18% or 24%) based on your income tax band.
Practical Example
Scenario: Sarah is a higher rate taxpayer with a salary of £65,000. In January 2026, she sells a buy-to-let flat for £350,000 that she originally purchased for £250,000. She spent £10,000 on solicitor's and estate agent's fees across the purchase and sale, and £15,000 on a kitchen extension.
| Item | Amount |
|---|---|
| Sale proceeds | £350,000 |
| Less: Purchase price | (£250,000) |
| Less: Buying/selling costs | (£10,000) |
| Less: Improvement costs | (£15,000) |
| Total gain | £75,000 |
| Less: Annual exempt amount | (£3,000) |
| Taxable gain | £72,000 |
| CGT at 24% (higher rate) | £17,280 |
Sarah would owe £17,280 in capital gains tax.
Want to run your own numbers? Try our United Kingdom Capital Gains Tax Calculator for an instant estimate.
Second Example: Basic Rate Taxpayer
Scenario: Tom earns £30,000 per year and sells shares for a gain of £15,000.
- Tom's taxable income after his personal allowance: £30,000 − £12,570 = £17,430.
- Remaining basic rate band: £37,700 − £17,430 = £20,270.
- Taxable gain: £15,000 − £3,000 (AEA) = £12,000.
- The full £12,000 fits within the remaining basic rate band.
- CGT at 18%: £12,000 × 18% = £2,160.
If Tom's gain were larger and exceeded the remaining basic rate band, the excess would be taxed at 24%.
You can also check your overall income tax position with our United Kingdom Income Tax Calculator.
Key Reliefs and Exemptions
Several reliefs can reduce or eliminate your CGT bill. Understanding these is one of the most important aspects of managing United Kingdom capital gains tax.
Private Residence Relief (PRR)
If you sell your main home, you usually do not pay CGT, thanks to Private Residence Relief. To qualify:
- The property must have been your only or main residence throughout ownership.
- The garden and grounds must not exceed the permitted area (usually 0.5 hectares).
- The property must not have been used exclusively for business.
If you lived in the property for part of the time, you may get partial relief proportional to the period of occupation. The last 9 months of ownership are always treated as a period of occupation if the property was your main home at some point.
Business Asset Disposal Relief (BADR)
Formerly known as Entrepreneurs' Relief, BADR allows qualifying business owners to pay a reduced CGT rate of 14% (increased from 10% from 6 April 2025) on the first £1 million of lifetime qualifying gains. From 6 April 2026, this rate will increase further to 18%.
Qualifying conditions include:
- You must be a sole trader or business partner selling all or part of the business, or
- You must hold at least 5% of shares and voting rights in a trading company and be an officer or employee.
- You must have held the qualifying status for at least 2 years before disposal.
Investors' Relief
Investors' Relief offers a reduced CGT rate on qualifying shares in unlisted trading companies. The rate aligns with BADR at 14% for 2025/2026 (rising to 18% from April 2026), with a separate £10 million lifetime limit.
Rollover Relief
If you sell a qualifying business asset and use the proceeds to buy a new one, you can defer the gain using Rollover Relief. The gain is "rolled over" into the cost of the new asset.
Gift Hold-Over Relief
When you give away business assets or assets where Inheritance Tax is immediately chargeable, Gift Hold-Over Relief lets you defer the gain. The recipient takes on the original base cost.
Losses
Capital losses can be offset against capital gains in the same tax year. If your losses exceed your gains, the excess can be carried forward to future tax years indefinitely. You must report losses to HMRC within four years to preserve the right to carry them forward.
Assets Exempt from CGT
Certain assets are entirely exempt from CGT:
- Your main home (via PRR)
- UK government gilts and qualifying corporate bonds
- Assets held in ISAs or SIPPs
- Personal possessions ("chattels") worth £6,000 or less on disposal
- Betting, lottery, and pools winnings
- Cars
- Compensation for personal injury
Reporting and Payment Deadlines
Understanding when to report and pay CGT is just as important as knowing how much you owe.
UK Residential Property Disposals
If you sell UK residential property and there is CGT to pay, you must:
- Report the disposal to HMRC within 60 days of the completion date.
- Pay the CGT within the same 60-day window.
This is done via the HMRC "Report and pay Capital Gains Tax on UK property" online service. Even if you file a Self Assessment tax return, you must still use this service for the 60-day report.
Other Assets
For all other chargeable disposals (e.g., shares, other investments), you report and pay CGT through your Self Assessment tax return. The deadline is:
- Online filing: 31 January following the end of the tax year (i.e., 31 January 2027 for 2025/2026 gains).
- Payment: Also due by 31 January 2027.
If you don't normally file a Self Assessment return, you'll need to register for one.
Penalties and Interest
Late reporting and late payment can result in:
- An initial penalty of £100 for late filing (with additional penalties for longer delays)
- Interest charged on overdue CGT from the date it was due
- Further penalties up to 100% of the tax due for deliberate non-compliance
Capital Gains Tax for Non-Residents
Non-UK residents are generally subject to CGT on:
- UK residential property disposals (since April 2015)
- All UK land and property disposals, including commercial property (since April 2019)
- Assets used in a UK trade through a branch or agency
The same CGT rates (18% and 24%) apply to non-residents as to UK residents, and the annual exempt amount of £3,000 is also available.
Double Taxation Agreements
The UK has an extensive network of double taxation agreements (DTAs) with over 130 countries. These treaties determine which country has the right to tax a capital gain and provide mechanisms to avoid being taxed twice on the same gain.
For example, under many DTAs, gains on shares are taxable only in the country of residence, while gains on immovable property (land and buildings) may be taxed in the country where the property is located. Always check the specific treaty between the UK and your country of residence.
Non-Resident CGT Reporting
Non-residents must report disposals of UK property or land within 60 days of completion, even if there is no tax to pay. Failure to report can result in penalties.
Common Mistakes and Misconceptions
Avoiding these pitfalls can save you significant money and hassle:
Forgetting the 60-day reporting deadline for property. Many taxpayers assume they can wait until their annual tax return. You can't – there is a separate, earlier deadline for UK residential property.
Not claiming allowable costs. Improvement costs, professional fees, and even certain incidental costs of disposal can reduce your gain. Keep all receipts.
Confusing revenue and capital. Regular income from property (rent) is subject to income tax, not CGT. Only the profit on disposal of the asset itself is a capital gain.
Assuming all property sales are exempt. PRR only applies to your main home. Second homes, buy-to-let properties, holiday homes, and inherited properties may all be subject to CGT.
Not reporting losses. If you make a capital loss, you should report it within four years to carry it forward against future gains.
Ignoring the reduced annual exempt amount. With the AEA now at just £3,000, many more people will have a CGT liability than in previous years. Plan disposals carefully.
Not considering the timing of disposals. Splitting disposals across two tax years can allow you to use two annual exempt amounts and potentially keep more gains within the basic rate band.
Frequently Asked Questions
Do I pay CGT on inherited assets?
You do not pay CGT when you inherit an asset. However, if you later sell or dispose of the asset, CGT may be due on the gain since the date of death. The base cost is the market value of the asset at the date of death.
Do I pay CGT on gifts between spouses or civil partners?
Transfers between spouses and civil partners who are living together are treated as made at "no gain, no loss" – meaning no CGT is due at the time of transfer. However, when the receiving spouse eventually sells the asset, they inherit the original base cost.
Can I deduct mortgage interest from my gain?
No. Mortgage interest is a financing cost and is not an allowable deduction for CGT purposes. Only the purchase price, improvement costs, and buying/selling costs qualify.
What if I make a loss?
Capital losses can be offset against gains in the same tax year. Any unused losses can be carried forward indefinitely. You must report losses to HMRC within four years of the end of the tax year in which the loss occurred.
Do I need to report if my gains are below the annual exempt amount?
If you file a Self Assessment tax return, you must report disposals if the total proceeds exceed four times the AEA (£12,000 for 2025/2026) or if you need to register a loss. If you are not in Self Assessment and your gains are below £3,000, you generally do not need to report. However, the 60-day rule for UK property applies regardless.
Conclusion and Key Takeaways
United Kingdom capital gains tax is a significant consideration for anyone selling property, shares, or other valuable assets in 2025/2026. Here are the key points to remember:
- CGT rates are 18% and 24% for all assets from April 2025, depending on your income tax band.
- The annual exempt amount is £3,000 – use it or lose it.
- Business Asset Disposal Relief offers a reduced 14% rate on qualifying gains up to £1 million (rising to 18% from April 2026).
- Report and pay CGT on UK property within 60 days of completion.
- Keep records of all allowable costs and report any losses within four years.
- Non-residents are subject to CGT on UK property and land disposals.
- Use double taxation treaties to avoid being taxed twice if you have international exposure.
To plan effectively and estimate your liability, use our United Kingdom Capital Gains Tax Calculator. If you also need to understand how your income affects your CGT rate, check out our United Kingdom Income Tax Calculator.
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.