What is Capital Gains Tax?
Capital Gains Tax (CGT) is charged on the profit you make when you sell or dispose of an asset that has increased in value. You pay tax on the gain, not the full sale price.
Assets that commonly trigger CGT include second properties and buy-to-let homes, shares and investments held outside an ISA, business assets, and valuables such as jewellery or art worth over £6,000.
CGT rates in 2025/26
The rate you pay depends on the type of asset and your income tax band:
- Residential property: 18% (basic rate) or 24% (higher or additional rate)
- Other assets including shares and business assets: 18% (basic rate) or 24% (higher or additional rate) from October 2024
- Business Asset Disposal Relief: 10% on qualifying business sales up to a lifetime limit of £1 million
Your gains are added to your income to determine which band applies. If some gains fall within your basic rate band, those are taxed at the lower rate.
The Annual Exempt Amount
Every individual receives an Annual Exempt Amount — the amount of gain you can make tax-free each year. For 2025/26 this is £3,000. This has reduced significantly in recent years (it was £12,300 in 2022/23), so more people are now liable for CGT than before.
You cannot carry forward unused allowance to the next tax year.
How to reduce your CGT bill
- Use your annual exempt amount by selling assets in the tax year to make use of your £3,000 allowance
- Transfer assets to a spouse or civil partner as there is no CGT between spouses, allowing you to use their allowance too
- Use losses since capital losses from other disposals in the same year can be offset against gains
- Invest through an ISA or SIPP as gains inside these wrappers are sheltered from CGT
- Claim Business Asset Disposal Relief if you are selling a qualifying business, since the 10% rate is significantly lower
- Principal Private Residence relief means your main home is exempt from CGT when you sell it
How to report and pay
If you sell a UK residential property at a gain, you must report it to HMRC and pay the tax within 60 days of completion using the UK Property Reporting Service.
For other assets, report gains through your Self Assessment tax return by 31 January following the tax year. If you do not normally complete Self Assessment, you will need to register.
When to get professional help
CGT calculations can be complex, particularly for inherited assets, properties with periods of letting, or business disposals. A qualified tax consultant can identify reliefs you may not be aware of and ensure your reporting is accurate.
Capital Gains Tax FAQs
Do I pay CGT if I sell my main home?
No. Your main residence is fully exempt from Capital Gains Tax under Principal Private Residence (PPR) relief. However, if you have let the property, used part of it for business, or have owned more than one property at the same time, the position may be more complex and partial CGT could apply.
What happens if I sell shares at a loss?
Capital losses can be offset against capital gains made in the same tax year. If your losses exceed your gains, you can carry the surplus forward to offset against future gains — indefinitely, provided you report them to HMRC. You must claim the losses within 4 years of the end of the tax year in which they arose.
What is the 60-day reporting rule?
If you sell a UK residential property and make a gain, you must report and pay any CGT due to HMRC within 60 days of completion using the UK Property Reporting Service — even if you complete a Self Assessment tax return. Late reporting attracts interest and penalties.