Capital Gains Tax UK: Complete Guide for 2025/26

Three years ago, your Capital Gains Tax annual exempt amount was £12,300. Today it is £3,000. That single change has brought hundreds of thousands of additional people into CGT territory: property investors, people who hold shares outside an ISA, business owners selling up, and anyone who received a windfall from an asset that grew in value. If you have sold anything valuable this tax year and are wondering what you owe, this guide covers everything you need to know for 2025/26.

CGT is a tax on the profit when you sell or dispose of something that has gone up in value. It is not a tax on the full sale price. If you bought shares for £5,000 and sold them for £18,000, your gain is £13,000, not £18,000. Only the profit counts.

"Disposing" of an asset covers more ground than most people realise. It includes selling it, giving it away as a gift, swapping it for something else, and receiving insurance compensation for a lost or destroyed asset.

CGT is not just for the wealthy. With the allowance now at just £3,000, anyone who sold investments, a second property or a business asset this year could be looking at a bill.

CGT applies to most personal possessions worth over £6,000 (except your car), property that is not your main home, shares held outside an ISA, business assets, and cryptocurrency.

Some assets are completely exempt:

The ISA point deserves emphasis. If you hold shares inside a Stocks and Shares ISA, there is no CGT on any gains, ever. This is one of the strongest practical reasons to use your full ISA allowance every year.

Your CGT annual exempt amount for 2025/26 is £3,000. You only pay CGT on gains above this figure. Any gains below £3,000 in a given tax year are completely free of tax.

The collapse in this allowance over the past few years is striking:

Three years ago, you could realise over £12,000 of gains before paying a penny. Now it is £3,000. Anyone who regularly sells shares, funds or property outside an ISA needs to be considerably more careful about managing gains across tax years.

The rate you pay depends on your income tax band, not on the type of asset you sold. From 6 April 2025, the rates were simplified and now apply to all asset classes:

Before October 2024, residential property attracted higher rates than other assets. From 6 April 2025, the same rates apply to everything. That sounds like a simplification, and it is. But for investors who previously paid 10% or 20% on share gains, those rates have risen to 18% and 24%. Not all good news.

Here is how the rate works in practice. You add your taxable gain (after deducting the £3,000 allowance) to your taxable income. The portion that falls within the basic rate band is taxed at 18%. Anything that pushes you above the higher rate threshold pays 24%.

A worked example with a £35,000 salary and a £20,000 gain:

Selling your main home is CGT-free if you lived in it as your main residence for the entire period of ownership, you did not let it out (having a lodger is fine), you did not use any part exclusively for business, and the grounds are under 5,000 square metres.

If all of those conditions apply, you pay nothing. This is Private Residence Relief and it is automatic.

Where it gets complicated: if you ever rented the property out, used it as a buy-to-let, or owned it without living in it as your main home for any part of the ownership period, you may owe some CGT. The gain is apportioned based on the period of non-qualifying use.

If you own two properties, only one can be your main home at any time for CGT purposes. You can nominate which one within two years of acquiring the second property. Getting this wrong can be expensive.

This is where most people get caught out. Selling a buy-to-let or second home means the full gain, minus the £3,000 allowance, is subject to CGT at 18% or 24%.

The deadline is severe: you must report and pay any CGT on UK residential property within 60 days of completion. Not 60 days from the end of the tax year. 60 days from when the sale completes. Miss this and HMRC charges interest and a penalty from day one.

To put the numbers in context: you buy a buy-to-let in 2015 for £180,000 and sell it in 2025 for £310,000. Your gain is £130,000. After the £3,000 allowance, £127,000 is taxable. As a higher rate taxpayer you pay 24%, which comes to £30,480.

You can deduct certain costs: stamp duty paid on purchase, legal fees on both purchase and sale, estate agent fees, and the cost of genuine improvements (not repairs or maintenance). Keep every receipt from the day you buy.

Every time you sell shares, funds or ETFs held outside an ISA, you potentially trigger a CGT event. With the allowance at £3,000, it does not take much of a gain to create a tax liability.

The "Bed and ISA" strategy is worth knowing. You sell shares outside an ISA and immediately buy them back inside one. Any gain on the current sale may trigger CGT, but future growth on those holdings sits inside the ISA permanently sheltered from tax. For long-term holdings that have grown significantly, this is often worth doing before they grow further.

Most people overlook losses. If some of your investments have fallen in value, selling them realises an allowable loss. You offset this against your gains to reduce your CGT bill, and any unused losses carry forward to future tax years without limit. Many investors run a quick review before 5 April each year specifically to harvest losses.

If you sell all or part of a qualifying business, Business Asset Disposal Relief (BADR) reduces your CGT rate to 14%. Previously known as Entrepreneurs' Relief, the rate rose from 10% to 14% in April 2025.

To qualify as a sole trader or business partner, you need to have owned the business for at least two years and be selling the whole or part of it as a going concern.

For limited company shareholders, you need at least 5% of the shares and voting rights, must be an employee or director, and must have held the shares for at least two years.

The lifetime limit is £1 million of qualifying gains. Gains above that pay the standard CGT rate. If you are approaching that figure across multiple disposals, planning the timing carefully matters.

Use your annual allowance every year. If you have gains sitting in investments, consider crystallising up to £3,000 of profit each tax year before 5 April. You cannot carry unused allowances forward, so letting them expire is wasted money.

Transfer assets to your spouse or civil partner before selling. Transfers between spouses are CGT-free. If your partner pays a lower rate of income tax, they use their own £3,000 allowance and pay CGT at a lower rate on any remaining gain.

Use your ISA allowance. Up to £20,000 per person per year, gains inside a Stocks and Shares ISA are permanently sheltered from CGT. The long-term value of consistent ISA use cannot be overstated.

Keep records of losses. Every investment that has fallen in value is a potential future tax saving. Claims for allowable losses must be made within four years of the end of the tax year of disposal, so do not leave it too long.

For property: if you sold a UK residential property and there is CGT to pay, you must report and pay within 60 days of completion using HMRC's online CGT on UK property account. Waiting until your Self Assessment return is not acceptable and will trigger penalties and interest.

For everything else: report via Self Assessment by 31 January following the end of the tax year. For gains made in the 2025/26 tax year (April 2025 to April 2026), the deadline is 31 January 2027.

One important detail most people miss: you must file a Self Assessment return if the total proceeds from all asset sales in the year exceed £50,000, even if your total gain falls below the £3,000 allowance.

Before you file, use our free Capital Gains Tax Calculator to work out your likely bill and check you have the right figures before submitting to HMRC.

Do I pay CGT when I sell my house?

Usually no. If you lived in the property as your main home for the entire period of ownership and it was not let out or used exclusively for business, Private Residence Relief eliminates the gain entirely. If you rented it out, had a period where you did not live in it as your main home, or it is a second property, you may owe some CGT on the portion relating to non-qualifying use.

Is cryptocurrency subject to CGT?

Yes. HMRC treats cryptocurrency as a capital asset, not as currency. Selling it, exchanging one cryptocurrency for another, using crypto to pay for goods or services, and receiving crypto as income from mining or staking all have CGT or income tax implications. Keep detailed records of every transaction including the date, sterling value at the time and any fees paid.

Can I give an investment to my child to avoid CGT?

No. Giving an asset to anyone other than a spouse or civil partner is treated as a disposal at market value for CGT purposes. You will be taxed on the gain as if you had sold it at the current price. Only transfers to a spouse or civil partner are CGT-free.

What happens if I do not report CGT?

HMRC charges interest from the date the tax was due. For residential property, the penalty for late filing starts at £100 and increases. For Self Assessment, penalties begin at £100 after the deadline and escalate significantly for longer delays. HMRC also has powers to investigate going back up to 20 years in cases of deliberate non-disclosure.

Can I use last year's CGT losses?

Yes. Allowable losses from previous tax years carry forward indefinitely. You apply them against current year gains, but only down to the level of the annual exempt amount. You cannot use old losses to push your net gains below zero. Losses must be claimed within four years of the end of the tax year in which the disposal occurred.

Does CGT apply to inherited assets?

When you inherit an asset, the estate typically pays Inheritance Tax at the time of death. Your base cost for CGT purposes is the market value at the date of death, not the original purchase price. You only pay CGT if you later sell or dispose of the inherited asset for more than that probate value.