Capital Gains Tax explained
CGT is the tax on the profit when you sell an asset that's risen in value. This guide covers the £3,000 allowance, the 18% and 24% rates, what's taxable, and how to reduce the bill.
What CGT applies to
Capital Gains Tax is charged on the gain, not the total proceeds, when you sell or dispose of an asset that has grown in value. It applies to shares and funds outside an ISA, second homes and buy-to-lets, crypto, business assets and valuable possessions. Your main home is usually exempt under Private Residence Relief. Everyone has a £3,000 annual exempt amount (2025/26) before any CGT is due.
18% and 24%
Since 30 October 2024, gains are taxed at 18% within your remaining basic-rate band and 24% above it, the same rates now apply to property and other assets. Crucially, the gain is stacked on top of your income to decide the split: a higher earner pays mostly 24%, while someone with little other income may pay 18% on much of it. That's why your income level changes the bill.
Legitimate ways to cut CGT
- Use both spouses' allowances: Transfers between spouses/civil partners are CGT-free, so you can use two £3,000 allowances and two basic-rate bands.
- Spread disposals across tax years: Selling in two tranches across 5 April uses two annual allowances.
- Use your ISA: Gains inside an ISA are completely CGT-free, "Bed & ISA" moves holdings into the wrapper.
- Offset losses: Capital losses reduce gains; report them to carry forward to future years.
- Claim reliefs: Private Residence Relief, Business Asset Disposal Relief (10% up to a lifetime limit) and gift reliefs can apply.
How and when to pay
For most assets, report gains on your Self Assessment return and pay by 31 January. For UK residential property, there's a separate rule: report and pay within 60 days of completion via an HMRC online property account. The annual exempt amount has shrunk sharply in recent years, so more disposals now create a reportable gain, keep records of costs and improvements.
Common mistakes
- Missing the 60-day property deadline. Residential property CGT is due within 60 days of completion, not at the end of the tax year.
- Forgetting allowable costs. Buying/selling costs and capital improvements reduce the gain, keep the paperwork.
- Wasting the annual allowance. It can't be carried forward. Use it each year, e.g. via Bed & ISA.
- Ignoring the spouse exemption. Transferring assets to a spouse first can double allowances and use a lower tax band.