If you're an investor, property owner, or expatriate with assets in both the United Kingdom and Italy, understanding how United Kingdom vs Italy capital gains tax works is essential for effective financial planning. Whether you're selling shares, disposing of property, or restructuring your portfolio, the capital gains tax comparison between these two major European economies reveals significant differences in rates, exemptions, and filing obligations.

In this comprehensive tax comparison United Kingdom Italy guide for the 2025/2026 tax year, we'll walk you through everything you need to know — from headline rates and annual allowances to practical examples and double taxation relief.

What Is Capital Gains Tax and Why Does This Comparison Matter?

Capital gains tax (CGT) is a tax levied on the profit you make when you sell or dispose of an asset that has increased in value. Both the United Kingdom and Italy impose capital gains tax, but they do so in fundamentally different ways.

For anyone with cross-border investments, dual residency, or plans to relocate between the UK and Italy, this capital gains tax comparison is critical. The wrong assumption about tax liability could cost you thousands of pounds or euros. Key reasons this comparison matters include:

  • Different rate structures: The UK uses tiered rates linked to income tax bands, while Italy generally applies a flat substitute tax on financial gains.
  • Different exemptions and allowances: The UK offers a personal annual exempt amount, whereas Italy takes a different approach to deductions.
  • Double taxation treaties: The UK-Italy tax treaty affects how gains are taxed when you have connections to both countries.
  • Residency rules: Each country defines tax residency differently, which determines your worldwide tax obligations.

Capital Gains Tax in the United Kingdom: 2025/2026 Rates and Rules

The United Kingdom's capital gains tax system for the 2025/2026 tax year (6 April 2025 to 5 April 2026) has undergone notable changes in recent years, including reductions to the annual exempt amount and adjustments to rates.

CGT Rates in the UK

Following the changes announced in the Autumn Budget 2024, the UK's CGT rates for 2025/2026 are as follows:

  • Basic rate taxpayers: 18% on most assets, including shares and other investments; 18% on residential property gains (previously 10% and 18% respectively for non-property and property assets, the lower rate for non-property gains was increased to 18% from 30 October 2024).
  • Higher and additional rate taxpayers: 24% on most assets, including shares and other investments; 24% on residential property gains (previously 20% and 24% respectively).
  • Business Asset Disposal Relief (BADR): A reduced rate of 14% applies for the 2025/2026 tax year (rising to 18% from April 2026) on qualifying business disposals, up to a lifetime limit of £1 million.
  • Investors' Relief: Also 14% for 2025/2026 on qualifying shares, with the lifetime limit reduced to £1 million.

Annual Exempt Amount

For 2025/2026, the UK's annual exempt amount (also called the CGT allowance) remains at £3,000 for individuals and £1,500 for most trusts. This is a significant reduction from the £12,300 allowance that applied until April 2023, meaning more taxpayers now face CGT liabilities.

Key Features of UK CGT

  • Principal Private Residence Relief: Your main home is generally exempt from CGT.
  • ISA and pension exemptions: Gains within Individual Savings Accounts (ISAs) and pensions are not subject to CGT.
  • Carry-forward of losses: Capital losses can be carried forward indefinitely to offset against future gains.
  • Reporting deadlines: UK residents must report and pay CGT on residential property disposals within 60 days of completion. Other gains are reported through the annual Self Assessment tax return.

Use our United Kingdom Capital Gains Tax Calculator to estimate your CGT liability based on your specific circumstances.

Capital Gains Tax in Italy: 2025/2026 Rates and Rules

Italy's approach to capital gains tax differs considerably from the UK's system. Italy categorises capital gains into different types and applies varying tax treatments depending on the nature of the asset and the taxpayer's status.

CGT Rates in Italy

For the 2025/2026 tax year, Italy's capital gains tax rates are structured as follows:

  • Financial capital gains (redditi diversi): A flat substitute tax of 26% applies to most financial capital gains, including profits from the sale of shares, bonds, investment funds, and other financial instruments.
  • Government bonds and similar instruments: A reduced rate of 12.5% applies to gains from Italian government bonds (BOTs, BTPs, CCTs) and equivalent EU/EEA government bonds.
  • Real estate capital gains: Gains from the sale of property are generally subject to 26% substitute tax if the property was held for fewer than five years. Alternatively, the taxpayer can elect to include the gain in their ordinary income and pay at progressive IRPEF rates (ranging from 23% to 43%).
  • Real estate held for more than five years: Generally exempt from capital gains tax (with certain exceptions, such as properties that underwent significant renovation).
  • Qualified shareholdings: Since 2019, gains from both qualified and non-qualified shareholdings are subject to the flat 26% substitute tax.

Notable Changes for 2025/2026

Italy introduced changes affecting capital gains on cryptocurrency and digital assets. From 2025, gains on crypto-assets exceeding a €2,000 threshold are subject to the 26% substitute tax. There had been proposals to increase this rate to 42% for crypto gains, but as of the current 2025 legislation, the rate remains at 26% with the €2,000 de minimis exemption.

Key Features of Italian CGT

  • No general annual exempt amount: Unlike the UK, Italy does not provide a broad annual CGT allowance. However, specific de minimis thresholds apply to certain asset categories.
  • Principal residence exemption: Gains on the sale of a principal residence ("prima casa") are exempt if the property was owned and used as the main home for the majority of the holding period.
  • Tax regime options: Taxpayers can choose between the "regime dichiarativo" (declaration regime, where gains are reported annually) and the "regime del risparmio amministrato" (administered savings regime, where taxes are withheld by the financial intermediary).
  • Loss offsetting: Capital losses can generally be carried forward for four years to offset against gains of the same category.

Use our Italy Capital Gains Tax Calculator to calculate your potential Italian CGT obligations.

Side-by-Side Comparison: UK vs Italy Capital Gains Tax 2025/2026

Here's a direct capital gains tax comparison between the United Kingdom and Italy for the 2025/2026 tax year:

Feature United Kingdom Italy
Standard CGT rate (shares/investments) 18% (basic rate) / 24% (higher rate) 26% (flat substitute tax)
Government bond gains 18% or 24% (same as other assets) 12.5%
Residential property CGT rate 18% / 24% 26% (if held < 5 years) or progressive IRPEF rates
Property exemption (main home) Yes (Principal Private Residence Relief) Yes (prima casa exemption)
Property holding period exemption No automatic exemption based on holding period Generally exempt after 5 years
Annual exempt amount £3,000 No general exemption
Business disposal relief 14% up to £1m lifetime limit (BADR) No direct equivalent
Crypto-asset gains 18% / 24% (standard CGT rates) 26% (above €2,000 threshold)
Loss carry-forward Indefinite 4 years
Tax year 6 April – 5 April 1 January – 31 December

Practical Example: Selling Shares Worth £50,000 in Profit

Let's see how a £50,000 capital gain from share sales would be taxed in each country:

In the United Kingdom (higher rate taxpayer):

  • Gain: £50,000
  • Less annual exempt amount: £3,000
  • Taxable gain: £47,000
  • Tax at 24%: £11,280

In Italy (flat substitute tax):

  • Gain: £50,000 (approximately €58,500 at an exchange rate of 1.17)
  • No annual exempt amount
  • Tax at 26%: €15,210 (approximately £13,000)

In this scenario, the UK taxpayer would pay approximately £1,720 less than the Italian taxpayer, even at the higher rate. However, a UK basic rate taxpayer would pay even less — £47,000 × 18% = £8,460 — making the UK significantly more favourable for lower-income investors.

You can run your own scenarios using our United Kingdom Capital Gains Tax Calculator or Italy Capital Gains Tax Calculator.

Practical Example: Selling a Second Property

Scenario: You sell a second home for a profit equivalent to £100,000 after holding it for three years.

In the United Kingdom (higher rate taxpayer):

  • Gain: £100,000
  • Less annual exempt amount: £3,000
  • Taxable gain: £97,000
  • Tax at 24%: £23,280
  • Note: Must be reported and paid within 60 days of completion.

In Italy:

  • Gain: approximately €117,000
  • Held for fewer than 5 years, so the 26% substitute tax applies
  • Tax at 26%: €30,420 (approximately £26,000)
  • Alternatively, the taxpayer could choose to include the gain in ordinary income, which could result in a rate of up to 43% under IRPEF.

However, if the Italian property had been held for more than five years, the gain would generally be completely exempt in Italy — a significant advantage over the UK, where no such holding period exemption exists for investment properties.

Double Taxation: The UK-Italy Tax Treaty

The United Kingdom and Italy have a comprehensive double taxation agreement (DTA) that prevents the same income or gains from being taxed twice. Understanding this treaty is crucial for anyone with tax obligations in both countries.

Key Provisions for Capital Gains

  • Immovable property: Under the treaty, gains from the sale of real estate are generally taxable 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 the UK also has the right to tax it as part of your worldwide income. You would then claim a foreign tax credit in the UK to avoid double taxation.
  • Shares and financial instruments: Gains from the sale of shares are generally taxable only in the country of residence of the seller, unless the shares derive more than 50% of their value from immovable property in the other country.
  • Business assets: Gains from the disposal of business assets forming part of a permanent establishment are taxable in the country where the permanent establishment is located.

Avoiding Double Taxation in Practice

  1. Determine your tax residency under each country's domestic rules and the treaty tie-breaker provisions.
  2. Identify the source of the gain and which country has primary taxing rights.
  3. Claim foreign tax credits or exemptions as provided by the treaty.
  4. Keep thorough records of acquisition costs, disposal proceeds, and taxes paid in both jurisdictions.
  5. Seek professional advice — cross-border CGT situations are complex and mistakes can be costly.

Non-Residents: How Each Country Taxes Foreign Investors

If you're a non-resident with assets in either country, the rules differ significantly.

Non-Residents in the UK

  • UK real estate: Non-residents are subject to CGT on gains from UK residential property (since April 2015) and UK commercial property (since April 2019). The same rates apply as for residents (18%/24%).
  • UK shares and other assets: Non-residents are generally not subject to UK CGT on the sale of UK shares or other financial assets (unless the shares derive their value from UK land).
  • Temporary non-residence rules: If you leave the UK temporarily (for fewer than five complete tax years) and sell assets during that period, you may be taxed on the gains when you return.

Non-Residents in Italy

  • Italian real estate: Non-residents are subject to Italian CGT on gains from Italian property. The 26% substitute tax or progressive IRPEF rates apply, and the five-year exemption rule also applies to non-residents.
  • Italian shares: Non-residents are generally not subject to Italian CGT on the sale of shares in Italian companies, provided the seller does not hold a "qualified participation" (generally more than 20% of voting rights or 25% of capital in unlisted companies). Under many tax treaties, including the UK-Italy DTA, share gains are taxed only in the seller's country of residence.
  • Withholding by intermediaries: If a non-resident uses an Italian financial intermediary, the intermediary may apply withholding tax, which can then be reclaimed or credited under the applicable treaty.

Common Mistakes and Misconceptions

When dealing with capital gains tax comparison between the UK and Italy, taxpayers frequently make these errors:

  • Assuming your home country is automatically your tax residence: Both countries have specific statutory residency tests. Italy uses the 183-day rule and considers registered residence and domicile, while the UK uses the Statutory Residence Test (SRT) with its complex day-counting rules.
  • Forgetting the UK's 60-day reporting rule: UK residents (and non-residents selling UK property) must report and pay CGT on property disposals within 60 days of completion. Late reporting incurs penalties and interest.
  • Overlooking Italy's five-year exemption: Many taxpayers selling Italian property held for more than five years don't realise the gain may be completely exempt.
  • Ignoring the cost base calculation differences: The UK allows indexation allowance only for corporate gains. Italy may allow revaluation of the cost base in certain circumstances (such as the periodic "rivalutazione" options that Italy has offered for shares and land).
  • Failing to claim treaty relief: If you're taxed in both countries, you must actively claim relief under the double taxation agreement — it's not applied automatically.
  • Not considering the interaction with income tax: In both countries, your income tax position can affect your CGT rate. Use our United Kingdom Income Tax Calculator or Italy Income Tax Calculator to understand your full tax position.

Frequently Asked Questions

Which country has lower capital gains tax — the UK or Italy?

It depends on the asset type and your income level. For most financial assets, a UK basic rate taxpayer pays 18% compared to Italy's flat 26%, making the UK more favourable. However, Italy's 12.5% rate on government bonds and the five-year property exemption can make Italy more advantageous in specific scenarios.

Do I have to pay capital gains tax in both countries?

Potentially, but the UK-Italy double taxation agreement ensures you can claim credit for tax paid in one country against your liability in the other, preventing genuine double taxation. The key is determining which country has the primary right to tax the gain.

How is cryptocurrency taxed in the UK vs Italy?

In the UK, crypto gains are taxed at standard CGT rates (18% or 24%) with the £3,000 annual exempt amount. In Italy, crypto gains are taxed at 26% but only on gains exceeding the €2,000 annual threshold, providing a small exemption for minor trading activity.

Can I use capital losses from one country to offset gains in the other?

Generally, no. Capital losses incurred in one country can typically only be offset against gains taxed in that same country. Cross-border loss offsetting is not usually permitted.

What happens if I move from the UK to Italy (or vice versa)?

Your tax obligations will change based on your new residency status. The UK has temporary non-residence rules that can "claw back" gains if you return within five years. Italy may offer favourable tax regimes for new residents (such as the "impatriati" regime for returning workers, though this primarily affects employment income). Careful planning around the timing of asset disposals is essential.

Conclusion: Key Takeaways for the 2025/2026 Tax Year

The United Kingdom vs Italy capital gains tax landscape in 2025/2026 presents distinct advantages and disadvantages depending on your specific situation:

  • For share and investment gains: The UK is generally more favourable for basic rate taxpayers (18% vs 26%), while the difference narrows for higher rate taxpayers (24% vs 26%). Italy's flat rate offers simplicity but is higher for most investors.
  • For property gains: Italy's five-year holding exemption is a major advantage for long-term property investors. The UK has no equivalent exemption for investment properties, though both countries exempt principal residences.
  • For government bond investors: Italy's 12.5% rate is significantly lower than the UK's standard rates.
  • For cross-border situations: The UK-Italy double taxation treaty provides relief, but navigating it requires careful planning and professional guidance.

Whichever country you're focused on, accurate calculation is the first step to effective tax planning. Use our United Kingdom Capital Gains Tax Calculator or Italy Capital Gains Tax Calculator to model your specific scenarios and understand your potential tax liabilities.

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.