What Is Capital Gains Tax?

When Does Capital Gains Tax Apply?

You pay CGT when you dispose of an asset that has gone up in value. Disposal includes:¹

• Selling an asset
• Gifting it to someone (other than your spouse)
• Transferring it into a trust
• Swapping it for something else
• Receiving compensation for a damaged or lost asset

CGT applies to the profit you make, not the total sale price. If you bought shares for £10,000 and sold them for £15,000, your gain is £5,000.

What Assets Are Taxable?

Most personal assets are subject to CGT if you make a profit when you sell them:²

• Shares and unit trusts (except those held in an ISA or pension)
• Second properties and buy-to-let properties
• Business assets when you sell or close a business
• Personal possessions worth £6,000 or more (antiques, art, jewellery)
• Crypto assets and NFTs

You do not pay CGT on:

• Your main home (covered by Private Residence Relief)
• ISAs and PEPs
• UK government gilts and Premium Bonds
• Personal possessions worth £6,000 or less when you bought them
• Your car

The Annual CGT Allowance

For 2026-27, the annual CGT allowance is £3,000. This means you can make up to £3,000 in total gains across all your disposals without paying any tax.³

The allowance was £12,300 until 2022-23, then reduced to £6,000 in 2023-24 and £3,000 from 2024-25 onwards. Each individual gets their own allowance, so married couples can split assets to use both allowances.

CGT Rates for 2026-27

CGT rates depend on your total income and the type of asset:⁴

Whether you pay the basic or higher rate depends on your total taxable income plus your gains. If the gain pushes you into the higher-rate band (over £50,270), you pay the higher rate on the amount above that threshold.

How to Calculate Your Gain

Your gain is the sale price minus the original cost and certain allowable expenses:

• Sale price: what you sold it for
• Minus original cost: what you paid for it
• Minus allowable costs: solicitor fees, estate agent fees, stamp duty, improvement costs (not repairs)

Example: You bought a second property for £200,000, spent £20,000 on a loft conversion, and sold it for £280,000. Estate agent and solicitor fees totalled £5,000.

• Sale price: £280,000
• Original cost: £200,000
• Improvements: £20,000
• Sale costs: £5,000
• Gain: £280,000 - £200,000 - £20,000 - £5,000 = £55,000

After your £3,000 allowance, the taxable gain is £52,000.

Reporting and Paying CGT

You must report capital gains through Self Assessment by 31 January following the tax year. If you sold residential property, you must also report and pay CGT within 60 days of completion using the UK property disposal service.

Even if your gain is below the £3,000 allowance, you must report it if your total proceeds (sale prices) are over four times the allowance (£12,000 for 2026-27).