Capital Gains Tax (CGT) applies when you sell — or "dispose of" — an asset that has increased in value. That could be shares, a second property, cryptocurrency, or even a valuable painting. You're taxed on the profit (the gain), not the sale price. Your main home is usually exempt, which we'll cover below.
The annual exempt amount
Everyone gets a tax-free allowance for capital gains. For the 2025/26 tax year, the annual exempt amount is £3,000. That's a significant reduction from £12,300 just a few years ago — the government slashed it in 2023 and again in 2024. Any gains above £3,000 are taxable.
If you're married or in a civil partnership, you each get your own £3,000 allowance. Transferring assets between spouses before selling can sometimes make use of both allowances, which is perfectly legal and a well-known planning strategy.
CGT rates
The rate you pay depends on your income tax band and the type of asset:
For most assets (shares, crypto, personal possessions):
- Basic rate taxpayer — 18%
- Higher or additional rate taxpayer — 24%
For residential property (not your main home):
- Basic rate taxpayer — 18%
- Higher or additional rate taxpayer — 24%
These rates were aligned in the October 2024 Budget, removing the previous distinction between property and other assets. The increase from 10%/20% to 18%/24% on non-property assets was a notable change that affected many investors.
Selling your main home
Private Residence Relief means you usually don't pay CGT when selling your main home, provided you've lived in it as your primary residence throughout ownership. Complications arise if you've let part of it out, used it for business, or have more than one property. In those cases, the relief may be partial.
If you own a buy-to-let or second home, CGT is due on the gain when you sell. You must report and pay the tax within 60 days of completion using HMRC's online Capital Gains Tax on UK property service. Miss this deadline and you'll face penalties and interest.
Allowable deductions
You can reduce your gain by deducting certain costs:
- The original purchase price
- Buying and selling costs (solicitor fees, estate agent fees, stamp duty)
- Money spent on improvements (extensions, renovations — but not maintenance or repairs)
Keep records of all these costs. HMRC won't just take your word for it, especially on property disposals where the sums can be substantial.
Reporting and payment
For property sales, you report and pay within 60 days using the CGT on UK property service on GOV.UK. For other assets, you report through your self assessment tax return. If you don't normally file a return, you may need to register for one in the year you make a taxable gain.
Losses can be offset against gains in the same tax year or carried forward to future years. You need to report losses to HMRC within four years to preserve them. This is worth doing even if you don't have gains to offset right now — those carried-forward losses could save you tax later.
Business Asset Disposal Relief
If you're selling a business or shares in your personal trading company, you might qualify for Business Asset Disposal Relief (formerly Entrepreneurs' Relief). This gives you a reduced CGT rate of 14% on qualifying gains up to a lifetime limit of £1 million. The conditions are quite specific, so take professional advice before relying on this relief.