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What Is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax on the profit you make when you dispose of an asset for more than you paid. It’s the gain that’s taxed — not the full sale value. If you sell an asset for less than you paid, you’ve made a capital loss, which can reduce CGT on other gains.

CGT follows the UK tax year: 6 April to 5 April. All gains and losses in a year net off against each other. The £3,000 Annual Exempt Amount is applied before tax is calculated, so only net gains above £3,000 are taxable.

“Disposal” is broader than “selling.” It includes gifting, transferring, exchanging, or even destroying an asset (for an insurance claim). What triggers CGT depends on the asset type — the rest of this page walks through each.

What’s Taxed — and What’s Not

Not every asset triggers CGT. The two lists below are the headline rules — note them before you consider any disposal.

The Annual Exempt Amount & the Rates

Every individual gets an annual tax-free allowance — the Annual Exempt Amount (AEA). Above that allowance, CGT is charged at one of two rates, depending on your income band.

The AEA — now £3,000

For the 2026/27 tax year, the Annual Exempt Amount is £3,000 per individual. This is down from £12,300 just three years earlier — a 76% reduction over two tax years (see Recent Changes below). Many disposals that were previously sheltered under the allowance now become taxable.

The rates

Since 30 October 2024, CGT rates are unified across all asset types:

• Basic-rate taxpayer (income up to £50,270): 18% on gains
• Higher or additional-rate taxpayer (income above £50,270): 24% on gains

The rate you pay depends on your total taxable income plus the gain. A basic-rate taxpayer with a large gain can push into the higher band — paying 18% on the portion within the basic band and 24% on the portion above.

Capital losses — a key lever

If you’ve made losses on other assets in the same tax year, those losses offset your gains first — so you only pay CGT on the net figure. Unused losses carry forward indefinitely against future gains.

You must register losses with HMRC within 4 years of the tax year they occurred. Unreported losses can’t be used. For active investors, “harvesting” losses in a bad year can shelter substantial future gains.

Property CGT & the 60-Day Rule

Residential property is where most UK CGT is paid — and where most timing mistakes are made. The 60-day reporting rule catches thousands of sellers every year.

Private Residence Relief (PRR)

Your main home is fully exempt from CGT — this is PRR. To qualify, the property must have been your only or main residence for the entire period of ownership. Partial relief applies if you’ve lived there for only part of the time.

If you own multiple homes, you must nominate which is your main residence within two years of buying the second.

Second homes and buy-to-let

Full CGT applies. Rates are the same 18% / 24% as other assets (post the October 2024 unification). The taxable gain is the sale price minus your original purchase price, minus qualifying costs (buying and selling fees, capital improvements).

Shares, Crypto & Investments

CGT applies whenever you dispose of investment assets held outside a tax-sheltered wrapper. The detail varies by asset type.

Shares

Shares held outside an ISA or pension generate CGT when sold. HMRC uses Section 104 pooling — shares of the same class bought at different times are averaged to a single base cost per share, and that average is used for CGT when you sell.

Bed-and-ISA is a legitimate strategy: sell shares in your general account (realising the gain within your annual allowance), then buy them back inside an ISA — sheltering all future growth from CGT.

Cryptocurrency

HMRC treats cryptocurrency like shares for CGT purposes. Every disposal is a taxable event, including:

• Selling crypto for GBP or other fiat currency
• Crypto-to-crypto swaps (swapping Bitcoin for Ethereum counts as a disposal)
• Using crypto to buy goods or services
• Gifting crypto to someone other than a spouse

Keep detailed records of every transaction — dates, amounts, GBP value at the time. Specialist crypto tax tools can automate the calculation, but the data is your responsibility.

The 30-day “bed and breakfast” rule

You can’t sell a share or crypto position to realise a loss, then buy it back the same day to crystallise the tax loss while keeping your holding. HMRC’s 30-day rule treats shares repurchased within 30 days as if you never sold — so the loss can’t be claimed. Waiting 31 days, or buying a similar-but-not-identical asset, avoids this.

Reliefs & Planning

Some disposals qualify for reduced rates or deferred tax. The reliefs below are the main tools UK taxpayers use to manage CGT exposure.

Private Residence Relief (PRR)

Full exemption on your main home (see Property CGT section above).

Spouse and civil partner transfers

No CGT on transfers between spouses. The receiving spouse inherits your original base cost, then uses their own Annual Exempt Amount and rate when they sell. This effectively doubles the available allowance per tax year — a core planning move for couples with significant gains.

Business Asset Disposal Relief (BADR)

Reduced CGT rate on qualifying business disposals (selling your trading company, qualifying shares, or business partnership interests), up to a £1 million lifetime limit.

• Before April 2025: 10%
• From 6 April 2025: 14%
• From 6 April 2026: 18% — matching the standard basic-rate CGT

Investors’ Relief

Reduced rate on qualifying unlisted company shares held for 3+ years. Follows the same rate-phase path as BADR (14% in 2025/26 → 18% from 2026/27). The Autumn 2024 Budget cut the lifetime limit from £10 million to £1 million.

Gift Hold-Over Relief

When you gift certain business or trust assets, you can defer the CGT — the recipient inherits your base cost, and CGT crystallises only when they dispose of the asset. Applies to qualifying business assets, unlisted shares, and certain gifts into trusts.

Rollover Relief

Reinvest business sale proceeds into qualifying replacement business assets within 3 years, and the CGT is deferred until you eventually dispose of the replacement. Useful when restructuring or scaling a business.

ISA and pension wrappers

The simplest, most reliable CGT planning. Gains on investments held inside an ISA, SIPP, or other pension wrapper are CGT-free, forever. For most UK investors, maximising ISA and pension contributions is the foundational step.

The CGT Landscape Has Changed Rapidly

Three Budget decisions between 2022 and 2024 have reshaped UK CGT more than any single reform in the last decade.

1. Annual Exempt Amount collapse

• 2022/23: £12,300
• 2023/24: £6,000 (first cut)
• 2024/25 onwards: £3,000 (second cut)

The AEA has dropped 76% in three tax years. Disposals that would have sat tax-free under the 2022 allowance now generate taxable gains.

2. Rate unification — October 2024

The Autumn 2024 Budget unified CGT rates across asset types:

• Before 30 Oct 2024: residential 18%/28%, non-residential 10%/20%
• From 30 Oct 2024: unified at 18%/24% across all asset types

Net effect: non-residential taxpayers faced a rate hike (10%→18% and 20%→24%); higher-rate residential taxpayers got a small rate cut (28%→24%).

3. BADR and Investors’ Relief phase-up

Business Asset Disposal Relief was 10% for qualifying business disposals up to £1m lifetime. The Autumn 2024 Budget announced a two-step phase-up:

• April 2025: 14%
• April 2026: 18% — matching standard basic-rate CGT

Investors’ Relief follows the same path, with its lifetime cap cut from £10 million to £1 million.

Combined, these changes make CGT materially more expensive than it was in 2022. Timing disposals, using both spouses’ allowances, and maxing ISA / pension wrappers matter more now than they have for a generation.

Common Questions

Quick answers to the questions we see most often. Click any question to expand.

Your Next Step

Whether you’re planning a sale, working out a crypto bill, or figuring out a spouse transfer — start with the numbers.

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