UK Capital Gains Tax: Rates, Allowance & How It Works (2025/26)

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UK Capital Gains Tax catches the profit on selling shares, property, crypto and other assets. This guide explains the 2025/26 rates, the shrunken £3,000 annual exempt amount, how gains stack on your income to set the rate, what’s exempt, and the reporting deadlines — including the 60-day rule for residential property.

What is Capital Gains Tax and when does it apply?

CGT is charged on the gain — the profit — when you sell or otherwise dispose of an asset that has increased in value. You’re taxed on the increase, not the whole sale price. It applies to shares held outside ISAs, second homes and investment property, cryptocurrency, business assets, and personal possessions worth over £6,000. Your main home and ISA investments are generally exempt.

A disposal isn’t only a sale — gifting an asset, swapping it, or transferring it can all trigger CGT based on market value. This catches people out, since giving away a valuable asset can create a tax bill even though no money changed hands. Understanding what counts as a chargeable disposal is the first step in managing CGT.

What are the CGT rates for 2025/26?

For 2025/26, CGT is charged at 18% on gains falling within your unused basic-rate income tax band and 24% on gains above it. The Autumn Budget 2024 raised the rates on shares and other assets from 10% and 20% to align them with residential property rates from 30 October 2024, so there’s now a single rate structure for most assets.

This alignment simplified the system but increased the tax on shares and business assets significantly. The rate you pay depends on your total income plus the gain: if your income already uses your basic-rate band, the whole gain is taxed at 24%; if you have unused basic-rate band, part of the gain may fall at 18%.

How has the annual exempt amount changed?

Every individual has an annual exempt amount (AEA) — the gains you can make tax-free each year. For 2025/26 it’s just £3,000, having been cut from £12,300 in 2022/23 and £6,000 in 2023/24. Trustees generally get half the individual amount. The AEA is use-it-or-lose-it: you can’t carry unused allowance forward to a future year.

These cuts have dramatically widened CGT’s reach. Disposals that would once have been comfortably covered by the £12,300 allowance now generate a tax bill, pulling ordinary investors and second-home sellers into CGT for the first time. This makes timing disposals and using each year’s allowance far more important than it used to be.

How do gains stack on top of income?

Your taxable gain is added on top of your income to determine which CGT rate applies. The slice of gain that fits within your remaining basic-rate band (income up to £50,270) is taxed at 18%; any gain above that is taxed at 24%. So a large gain can be split, with part at 18% and part at 24%, depending on how much basic-rate band your income leaves free.

This stacking means your income in the year of disposal directly affects your CGT bill. A year when your income is lower — perhaps after retiring or taking a career break — can be an efficient time to realise gains, since more of the gain may fall in the 18% band. Coordinating disposals with your income level is a core CGT planning technique.

What is exempt from Capital Gains Tax?

Several important exemptions exist. Your main home is usually covered by Private Residence Relief. Investments held within an ISA are entirely CGT-free. Gifts between spouses or civil partners living together are exempt. Personal possessions worth £6,000 or less, most cars, and gains within pensions are also outside CGT. Premium Bonds and certain government securities are exempt too.

These exemptions are the backbone of CGT planning. Holding investments in an ISA shelters all future gains; using the spousal exemption lets couples transfer assets to use both annual allowances and lower bands; and Private Residence Relief keeps most home sales tax-free. Knowing what’s exempt is as valuable as knowing the rates.

How and when do I report and pay CGT?

For most assets like shares and funds, you report gains through your Self Assessment return and pay by the normal 31 January deadline. But UK residential property is different: you must report the gain and pay the CGT within 60 days of completion, using a separate HMRC ‘Capital Gains Tax on UK property’ account — a tight deadline that catches many sellers out.

You may also need to report disposals even if no tax is due, where total proceeds exceed a threshold. Missing the 60-day property deadline triggers penalties and interest, so anyone selling a second home or rental property must act quickly. Building the CGT reporting into the sale process from the outset avoids a costly oversight.

How can I reduce my CGT bill legitimately?

Legitimate CGT planning uses the reliefs and allowances built into the system: using your £3,000 annual exemption each year, spreading disposals across tax years, transferring assets to a spouse to use their allowance and bands, offsetting losses against gains, and sheltering investments in ISAs and pensions. Timing disposals for a lower-income year can also cut the rate.

Capital losses are particularly valuable — they’re offset against gains in the same year, and unused losses can be carried forward indefinitely. ‘Bed and ISA’ transactions, where you sell investments and rebuy them inside an ISA, crystallise gains while sheltering future growth. These everyday techniques, applied consistently, can substantially reduce CGT within the rules.

A practical example: selling shares

Suppose you have £45,000 of income and make a £20,000 gain on shares held outside an ISA. After the £3,000 annual exemption, £17,000 is taxable. Your basic-rate band runs to £50,270, leaving £5,270 of room, so £5,270 of the gain is taxed at 18% and the remaining £11,730 at 24% — producing a bill far higher than under the old £12,300 allowance and 10%/20% rates.

Had you spread the disposal across two tax years, or transferred half the shares to a spouse first, you could have used additional allowances and lower-rate bands to cut the bill. The example shows why, with the allowance now just £3,000 and rates at 18%/24%, active CGT planning around timing and ownership matters more than ever.

How does CGT apply to cryptocurrency and other assets?

Cryptocurrency is treated as an asset for CGT, so selling, exchanging or spending crypto can trigger a chargeable gain on the increase in value since acquisition. The same 18%/24% rates and £3,000 allowance apply. With many crypto investors unaware of this, and HMRC increasingly able to track transactions, accurate record-keeping of crypto disposals is now essential.

Other assets within CGT include shares and funds held outside ISAs, valuable personal possessions over £6,000, and business assets. Each disposal during the year is pooled to calculate the total gain against the single annual exemption. Because the allowance is now so small, even modest investors and crypto holders can find themselves with a reporting obligation and a tax bill they didn’t expect.

How do capital losses work?

When you dispose of an asset for less than you paid, you make a capital loss, which can be offset against capital gains in the same tax year to reduce your CGT. If your losses exceed your gains, the surplus can be carried forward indefinitely to set against future gains, making losses a valuable long-term asset in managing CGT.

To use a carried-forward loss you generally need to have reported it to HMRC, so claiming losses even in years with no gains preserves them for the future. Loss harvesting — deliberately realising losses to offset gains — is a legitimate planning technique, particularly useful in volatile markets. Tracking and claiming losses properly is an often-overlooked way to reduce CGT over time.

Why CGT planning matters more than ever

With the annual exemption slashed to £3,000 and rates raised to 18% and 24%, CGT now bites far harder than it did a few years ago. Disposals that were once tax-free can produce meaningful bills, and the gap between planned and unplanned disposals has widened. This makes the timing of sales, the use of allowances and the choice of ownership genuinely consequential.

The practical response is to treat CGT as something to manage actively: using each year’s allowance, spreading disposals, involving a spouse, sheltering investments in ISAs, and harvesting losses. None of this is aggressive avoidance — it’s the everyday planning the system permits. In the current environment, applying it consistently can save substantial tax that would otherwise be lost to a shrunken allowance and higher rates.

Common CGT mistakes to avoid

Frequent CGT errors include missing the 60-day property reporting deadline, forgetting to claim allowable acquisition and improvement costs, not using the annual exemption before the tax year ends, failing to report and carry forward losses, and overlooking the spousal transfer that could halve a bill. Each can cost money or trigger penalties.

Avoiding them comes down to knowing the deadlines, keeping records of costs and losses, using each year’s allowance, and considering ownership and timing before a disposal. With the allowance now just £3,000 and rates at 18% and 24%, these once-minor details now make a real difference to the tax, rewarding anyone who approaches disposals with a little forethought.

How does CGT connect to the wider tax system?

CGT doesn’t operate in isolation — it interacts with income tax through the band stacking that sets your rate, with Inheritance Tax through the treatment of inherited assets, and with the reliefs that reward business owners and investors. A disposal in a low-income year, or one structured to use BADR, shows how income tax and CGT planning work together rather than separately.

For investors and business owners, seeing CGT as one element of an integrated tax position leads to better outcomes than treating it alone. The interaction with ISAs and pensions, the spousal exemption, and the business reliefs all link CGT to the broader picture of personal and business tax — the integrated approach that runs through our country tax guides and underpins genuinely effective planning.

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