Understanding UK Capital Gains Tax
Capital Gains Tax (CGT) is charged on the profit you make when you sell or dispose of an asset that has increased in value. Not all assets are subject to CGT - your main home is typically exempt under Private Residence Relief, and gains within ISAs and pensions are tax-free.
How CGT Rates Work
Your CGT rate depends on two factors: the type of asset and your total taxable income. Your income determines how much of the basic rate band (£50,270) remains unused. Any gain that falls within the remaining basic rate band is taxed at the lower rate; anything above is taxed at the higher rate. For the 2025-26 tax year, residential property gains attract rates of 18% (basic) and 24% (higher), while other assets are taxed at 10% and 20% respectively.
The Shrinking Annual Exempt Amount
The annual exempt amount has been drastically reduced in recent years. It dropped from £12,300 in 2022-23 to £6,000 in 2023-24, and then to just £3,000 from 2024-25 onwards. This means more people will find themselves paying CGT, even on relatively modest gains. Using ISAs and pensions for investments is now more important than ever to shelter growth from CGT.
Key CGT Exemptions and Reliefs
Several reliefs can reduce or eliminate your CGT liability. Private Residence Relief exempts gains on your main home. Business Asset Disposal Relief (formerly Entrepreneurs' Relief) offers a 10% rate on qualifying business disposals up to a lifetime limit of £1,000,000. Investors' Relief provides a similar 10% rate for external investors in unlisted trading companies. Losses on other disposals can be offset against gains in the same or future tax years.
Frequently Asked Questions
Do I pay CGT on my main home?â–¾
Generally no. Private Residence Relief exempts gains on your main home provided you have lived in it throughout ownership. However, if you have let part of it, used it for business, or have very large grounds, a portion of the gain may be taxable. Second homes and buy-to-let properties do not qualify for this relief.
Can I transfer assets to my spouse to reduce CGT?â–¾
Yes. Transfers between spouses and civil partners are made on a "no gain, no loss" basis, meaning no CGT is triggered. This is a legitimate tax planning strategy - by splitting assets between spouses, you can use both annual exempt amounts (£6,000 total) and potentially keep gains within the basic rate band.
When do I need to report and pay CGT?â–¾
For UK residential property disposals, you must report and pay CGT within 60 days of completion. For other assets, CGT is reported via your Self Assessment tax return and paid by 31 January following the end of the tax year. If you do not normally file a tax return but have gains to report, you will need to register for Self Assessment.
Calclypso Editorial Team
CGT rates verified against HMRC 2025-26 data. Last updated: April 2026. This calculator is for estimation purposes. For complex disposals, consult a tax adviser.