Capital Gains Tax Guide UK

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit (gain) you make when you sell or dispose of a capital asset. It is not a tax on the total amount you receive; it is a tax on the increase in value since you acquired the asset.

What is a Capital Asset?

A capital asset is any asset you own that is not part of your trading stock. Common examples include:

What is Not a Capital Asset?

• Your main home: Usually exempt under Private Residence Relief.
• Your car: Cars are exempt from CGT.
• ISAs and Pensions: Gains within these wrappers are tax-free.
• Personal possessions under £6,000.

When Do You Pay Capital Gains Tax?

You pay CGT when you:

• Sell a capital asset.
• Give away a capital asset (unless to a spouse or civil partner).
• Exchange a capital asset for something else.
• Receive compensation for a capital asset (e.g., insurance payout).

Capital Gains Tax Rates for 2026/27

The rates of CGT depend on your income and the type of asset. From 6 April 2026, the distinction between residential property and other assets has been eliminated for headline rates.

How Your Rate is Determined

Your CGT rate depends on your taxable income for the year.

If your total taxable income (including the gain) is below the basic rate band (£37,700 for 2026/27), you pay 18% on the part of the gain within the band. Any gain above the basic rate band is taxed at 24%.

Trustees and Personal Representatives

Trustees and personal representatives of someone who has died pay tax at 24% from 6 April 2026.

Business Asset Disposal Relief

From 6 April 2026, you’ll pay 18% if you’re a sole trader, partnership or trustee and your gains qualify for Business Asset Disposal Relief. The lifetime limit remains at £1 million.

The Annual Exempt Amount

Everyone has an Annual Exempt Amount (AEA) — a tax-free allowance for capital gains. For the 2026/27 tax year, the AEA is £3,000.

This means:

• You only pay CGT on gains above £3,000.
• If your total gains are below £3,000, you have no CGT to pay.
• You cannot carry forward unused AEA to future years.

For trustees, the AEA is £1,500 for 2026/27.

How to Calculate Your Capital Gain

Calculating your gain is a straightforward process, but you need to keep good records.

Step 1: Calculate the Sale Proceeds

• The sale price of the asset.
• Deduct any selling costs (e.g., estate agent fees, legal fees, broker commissions).

Step 2: Calculate the Purchase Costs

• The original purchase price.
• Add any purchase costs (e.g., stamp duty, legal fees, survey fees).
• Add the cost of any improvements (but not repairs and maintenance).

Step 3: Subtract the Costs from the Proceeds

• This gives you the gain.

Step 4: Deduct Your Annual Exempt Amount

• Deduct £3,000 from the gain.

Step 5: Apply the CGT Rate

• Apply the 18% or 24% rate, depending on your income.

Example Calculation: Shares

• Sale proceeds: £20,000
• Selling costs: £200 (broker fees)
• Net proceeds: £19,800
• Purchase cost: £10,000
• Purchase costs: £100 (broker fees)
• Total cost: £10,100
• Gain: £19,800 – £10,100 = £9,700
• Annual Exempt Amount: £3,000
• Taxable gain: £6,700
• CGT (assuming higher rate taxpayer): £6,700 × 24% = £1,608

Capital Losses

If you make a loss on a capital asset, you can use it to reduce your gains.

• Same Year: Losses are first set against gains in the same tax year.
• Carry Forward: Any unused losses can be carried forward to future tax years.
• Reporting Losses: You must report losses to HMRC within 4 years of the end of the tax year in which they arose.

Reporting and Paying Capital Gains Tax

There are different ways to report and pay CGT depending on the asset.

1. UK Residential Property

• You must report and pay CGT within 60 days of completion.
• Use the UK Property Account on GOV.UK.
• You must also include the details in your Self Assessment tax return.

For more detail, see our guide: Property Capital Gains Tax.

2. Other Assets (Shares, Crypto, etc.)

• If you already file a Self Assessment tax return, report the gain in your return by 31 January following the end of the tax year.
• If you don’t normally file a tax return, you can use the Real-Time CGT Service to report and pay without registering for Self Assessment.

For more detail, see our guide: Reporting Capital Gains.

How We Can Help

Capital Gains Tax can be complex, especially with multiple assets and different reporting deadlines. Our ACCA-qualified accountants can:

• Calculate your CGT liability accurately.
• Identify reliefs and allowances you may be eligible for.
• Help you report and pay CGT on time.
• Advise on tax-efficient disposal strategies.

This guide is intended for informational purposes and is based on UK tax regulations as of June 2026. Tax laws and government systems are subject to change. Always consult with a qualified professional regarding your specific financial situation. Right Tax Returns is an ACCA-registered firm.