Capital Gains Tax Guide: Rates, Allowances & How to Calculate

The Complete UK Capital Gains Tax Guide for 2025/26

Capital Gains Tax (CGT) is charged on the profit you make when you sell or dispose of an asset that has increased in value. This guide covers the rates, exemptions, reliefs, and reporting requirements for the 2025/26 tax year.

CGT Rates for 2025/26

CGT rates depend on the type of asset and your taxable income:

Residential property (not your main home):

• Basic rate taxpayers: 18%
• Higher/additional rate taxpayers: 24%

Other assets (shares, personal possessions, business assets):

• Basic rate taxpayers: 10%
• Higher/additional rate taxpayers: 20%

Important: Your gain is added on top of your taxable income to determine which band it falls into. If your income is £45,000 and you make a £20,000 gain, the first £5,270 of the gain falls within the basic rate band (taxed at 10%/18%) and the remaining £14,730 is taxed at the higher rate (20%/24%).

Annual Exempt Amount

Every individual has an annual CGT exemption of £3,000 for 2025/26 (reduced from £6,000 in 2023/24 and £12,300 in 2022/23). Gains up to this amount are tax-free.

The exemption:

• Cannot be carried forward — use it or lose it
• Applies per person (couples have £6,000 combined)
• Must be used against gains in the current year before losses are offset

What Is Exempt from CGT?

The following disposals are not subject to CGT:

• Your main home — Private Residence Relief (PRR) exempts gains on your principal private residence (see below)
• ISA investments — All gains within ISAs are tax-free
• Pension funds — No CGT on growth within pensions
• UK government gilts — Exempt from CGT
• Premium Bonds and National Savings certificates
• Personal possessions (chattels) worth £6,000 or less at the time of disposal — including jewellery, antiques, and art
• Cars — Always exempt, regardless of value
• Gains on death — Assets are revalued to market value at death; no CGT is payable (though IHT may apply)
• Gifts to charity
• Betting, lottery, and pools winnings
• Compensation for personal injury

Private Residence Relief (PRR) and Letting Relief

Your main home is exempt from CGT under Private Residence Relief for all periods when:

• You lived in it as your main home
• The last 9 months of ownership (regardless of whether you lived there)
• Periods of absence of up to 3 years for any reason, plus unlimited periods of absence while working overseas, plus up to 4 years while working elsewhere in the UK — provided you lived in the property before and after the absence

Nominating your main home: If you own more than one property, you can nominate which is your main home for CGT purposes. The nomination must be made within 2 years of acquiring the second property. This can be a valuable planning tool.

Letting Relief: If you let out part or all of your main home, you can claim letting relief of up to £40,000 (the lowest of: the gain attributable to the letting period, the amount of PRR, or £40,000). Since April 2020, this only applies if you were in shared occupation with the tenant.

Calculating the Gain

The taxable gain is calculated as:

Disposal proceeds (sale price or market value) Minus acquisition cost (what you paid, or market value at acquisition if gifted) Minus enhancement expenditure (capital improvements that enhance the asset's value — not maintenance or repairs) Minus allowable incidental costs (solicitor fees, estate agent fees, stamp duty on purchase, valuation fees) Equals the gain (or loss)

Example — Selling a buy-to-let property:

• Purchase price (2015): £200,000
• Stamp duty on purchase: £1,500
• Solicitor fees on purchase: £1,200
• Extension (2018): £30,000
• Sale price (2025): £320,000
• Estate agent fee (1.5%): £4,800
• Solicitor fees on sale: £1,500
• Gain: £320,000 – £200,000 – £1,500 – £1,200 – £30,000 – £4,800 – £1,500 = £81,000
• Minus annual exemption: £81,000 – £3,000 = £78,000 taxable
• Tax at 24% (higher rate): £18,720

Bed and Breakfasting Rules

Historically, investors would sell shares to crystallise a gain (using the annual exemption) and immediately rebuy them. Anti-avoidance rules now state that if you sell and repurchase the same shares within 30 days, the original cost base carries over — the sale is matched to the repurchase.

Workarounds (legitimate):

• Sell shares and buy a different but similar fund (e.g., sell a FTSE 100 tracker and buy a FTSE All-Share tracker)
• Your spouse buys the shares instead (they are not the same person for this rule)
• Buy within an ISA or pension (the 30-day rule does not apply across different tax wrappers)

60-Day Reporting for UK Residential Property

If you make a taxable gain on UK residential property (that is not covered by PRR), you must:

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

This is done through the Capital Gains Tax on UK Property service on GOV.UK. The gain is then included in your self-assessment return for the year, and any overpayment is refunded.

Late reporting penalties: £100 initial penalty, rising to £300 or 5% of the tax (whichever is higher) after 6 months.

Losses — How to Offset and Carry Forward

Capital losses can be set against gains in the same tax year. If losses exceed gains, the excess can be carried forward indefinitely to offset future gains.

Important rules:

• Losses in the current year must be fully offset before using brought-forward losses
• Brought-forward losses only need to reduce the gain to the annual exempt amount — you do not have to waste them
• Losses must be reported to HMRC within 4 years to be carried forward (even if you have no gains to offset)
• You cannot create artificial losses by selling to a connected person (spouse, close family, company you control)

Spouse Transfers for Tax Planning

Transfers between spouses and civil partners are made at no gain, no loss — they do not trigger CGT. This allows legitimate tax planning:

• Use both annual exemptions: Transfer half an asset to your spouse, then both sell — doubling the tax-free amount to £6,000.
• Utilise the lower-earning spouse's basic rate band: If one spouse is a basic rate taxpayer and the other is higher rate, transfer the asset to the basic rate taxpayer before selling (10%/18% instead of 20%/24%).
• Offset one spouse's losses against the other's gains: Transfer the asset before sale.

Note: From 6 April 2023, transfers between separating spouses must be completed within 3 years of separation (previously only until the end of the tax year of separation).

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

BADR reduces the CGT rate to 10% on qualifying business disposals, up to a lifetime limit of £1,000,000 of gains.

Qualifying conditions:

• Sole trader or business partner: must have owned the business for at least 2 years
• Company shares: must hold at least 5% of shares and voting rights, be an officer or employee, and have met these conditions for at least 2 years

BADR covers the disposal of the whole or part of a trading business, shares in a personal trading company, or assets used in the business after it ceases trading (disposed of within 3 years).

Investors' Relief

A 10% CGT rate on gains from qualifying shares in unlisted trading companies, up to a lifetime limit of £10 million. The shares must have been:

• Newly issued shares (not purchased on the secondary market)
• Held for at least 3 years
• Subscribed for on or after 17 March 2016

The investor must not be an employee or director of the company (unlike BADR).

CGT and Death

When a person dies, there is no CGT on death. Assets are revalued to their market value at the date of death. Beneficiaries who inherit the assets use this market value as their base cost.

This means that if someone bought shares for £10,000 and they are worth £100,000 at death, the £90,000 gain is never taxed for CGT purposes (though the full £100,000 value is included in the estate for IHT).

Planning point: It can be better to hold highly-appreciated assets until death rather than gifting them during lifetime (which triggers a CGT disposal at market value).

Reporting and Payment Deadlines

| Situation | Reporting Deadline | Payment Deadline | |---|---|---| | UK residential property gain | 60 days after completion | 60 days after completion | | Other gains (shares, etc.) | 31 January following the tax year (via self-assessment) | 31 January following the tax year | | Non-resident disposing of UK property | 60 days after completion | 60 days after completion |

If you are not already registered for self-assessment and have non-property gains to report, you must register by 5 October following the tax year.

Record Keeping Requirements

HMRC can enquire into your tax return for up to 4 years (6 years if careless, 20 years if deliberate). Keep records of:

• Purchase contracts and completion statements — including all costs
• Improvement receipts — for any capital enhancement expenditure
• Sale contracts and completion statements
• Dividend reinvestment records — these increase your base cost in shares
• Loss claims — keep evidence of losses even if no gains to offset currently
• Valuations — particularly for assets held at 31 March 1982 (the CGT base date) or inherited assets
• Gift records — market valuations at the date of gift

Practical tip: Maintain a spreadsheet of all share purchases and sales with dates, quantities, costs, and proceeds. Pooling rules for shares mean you need a running average cost — your broker may provide this.

Use our Capital Gains Tax Calculator to estimate your CGT liability for 2025/26.