UK Capital Gains Tax Explained: Rates and Allowance

Capital gains tax is the charge that arises when a UK resident disposes of an asset for more than the cost of acquiring it. The structure has changed substantially in recent years. The annual exempt amount fell from GBP 12,300 in 2022/23 to GBP 6,000 in 2023/24 and to GBP 3,000 from 2024/25, and the main rates were realigned from 30 October 2024 at 18% and 24% across all asset classes, removing the lower main rates of 10% and 20% that had previously applied to non-residential gains.

Capital gains tax sits under the Taxation of Chargeable Gains Act 1992 and is administered through both annual Self-Assessment for most assets and a 60-day reporting regime for UK residential property. The figures below apply to UK-resident individuals; trustees, personal representatives and non-residents face different rate structures and reporting routes.

What counts as a chargeable disposal

A disposal under section 21 TCGA 1992 covers the sale of an asset, a gift, an exchange, the loss or destruction of an asset, and certain deemed disposals such as the grant of certain rights. The most common disposals for UK residents are sales of second homes, buy-to-let properties, listed shares held outside ISAs, cryptoassets, and unincorporated business assets on cessation.

Chattels worth less than GBP 6,000 at disposal are exempt under section 262 TCGA 1992. Cars used as private vehicles are exempt under section 263. Gilts and most UK government bonds are exempt under section 115. Assets held within an ISA or registered pension scheme are exempt from CGT. Foreign currency held for personal use was removed from the chargeable scope from 6 April 2012.

The disposal is treated as occurring on the date of the unconditional contract under section 28 TCGA 1992, not the date of completion. For a property sale where exchange and completion fall in different tax years, the gain falls into the year of exchange. This matters at year-end where an exchange on 5 April produces a gain in the closing year while completion in April lands the funds in the next year.

Edge case: a part disposal of an asset uses the A over A plus B formula in section 42 TCGA 1992 to apportion base cost, with A being the proceeds of the part disposed of and B being the market value of the part retained. Land sales of less than 20% of the original holding and below GBP 20,000 of proceeds can elect to defer the gain into the remaining holding under section 242 TCGA 1992.

Calculating the gain: base cost, costs and reliefs

The chargeable gain is the proceeds of disposal less the base cost and allowable costs of acquisition and disposal. Allowable costs include legal fees, surveys, stamp duty paid on acquisition, estate agent and conveyancing fees on sale, and capital improvements that enhance the asset (not routine repairs). Section 38 TCGA 1992 lists the categories of allowable expenditure.

Where the asset was acquired by gift or inheritance, the base cost is the market value on the date of acquisition. For inherited assets the probate value is normally used. For gifts between connected persons under section 18 TCGA 1992, market value applies regardless of the actual consideration. For assets held at 31 March 1982, the rebased market value at that date is used as the base cost under section 35 TCGA 1992.

Reliefs that reduce the gain include Private Residence Relief on a main home, Business Asset Disposal Relief on qualifying business disposals, Investors' Relief on certain unlisted shares, Gift Hold-Over Relief on business assets gifted, and Rollover Relief where qualifying business assets are replaced within three years before or after the disposal. Each relief has its own conditions and lifetime limits.

Worked example: a buy-to-let flat bought in 2010 for GBP 180,000 is sold in 2026 for GBP 320,000. Stamp duty paid on purchase was GBP 1,800, conveyancing fees on purchase and sale total GBP 4,500, and a GBP 18,000 kitchen and bathroom upgrade was carried out in 2014. Allowable costs are GBP 180,000 plus GBP 24,300 (cost-of-disposal items plus the capital improvement), giving a gain of GBP 115,700.

Rates, the annual exempt amount and three worked examples

For 2026/27 the annual exempt amount is GBP 3,000. Gains within the AEA are not taxed. Above the AEA the rate depends on the taxpayer's total taxable income for the year. Gains stack on top of income for band purposes: the portion of gain falling within the remaining basic-rate band is taxed at 18%, with any excess at 24%.

Worked example one: a basic-rate employee with GBP 30,000 of taxable income realises a GBP 20,000 share gain. After the GBP 3,000 AEA the taxable gain is GBP 17,000. The basic-rate band has GBP 20,270 of remaining capacity (GBP 50,270 less GBP 30,000), so the entire GBP 17,000 is taxed at 18%, a CGT bill of GBP 3,060.

Worked example two: a higher-rate taxpayer with GBP 65,000 of taxable income sells a buy-to-let for a gain of GBP 80,000. After the GBP 3,000 AEA the taxable gain is GBP 77,000. With no basic-rate band left, all GBP 77,000 is taxed at 24%, a CGT liability of GBP 18,480.

Worked example three: a basic-rate taxpayer with GBP 40,000 of income realises a GBP 30,000 cryptoasset gain. After the GBP 3,000 AEA, GBP 27,000 is taxable. The basic-rate band has GBP 10,270 of capacity left; the first GBP 10,270 of gain is taxed at 18% (GBP 1,849), and the remaining GBP 16,730 is taxed at 24% (GBP 4,015). Total CGT is GBP 5,864.

Residential property and the 60-day return

UK residential property disposals by UK residents require a CGT on UK property return filed within 60 days of completion. The 60-day rule was introduced as 30 days from 6 April 2020 and extended to 60 days from 27 October 2021 under Schedule 2 of Finance Act 2019 and the related amending legislation. The return is filed through the HMRC CGT on UK property account, separate from Self-Assessment.

The tax due is paid at the same point, calculated by estimating income for the year to determine whether the 18% or 24% rate applies. Where the actual position at year-end differs, the final calculation is made on the Self-Assessment return and any adjustment paid or refunded then. The taxpayer must hold a Government Gateway account and complete property details, proceeds, base cost, allowable costs and reliefs claimed.

Failure to file within 60 days triggers Schedule 55 penalties as for Self-Assessment: GBP 100 immediate penalty, daily GBP 10 charges after three months, and tax-geared penalties at six and twelve months. Late payment interest accrues from the original due date under section 101 Finance Act 2009.

Edge case: a disposal in which Private Residence Relief covers the entire gain still requires consideration of the 60-day reporting obligation only where a chargeable gain exists. Where the relief extinguishes the gain completely, no 60-day return is needed. Where any part of the gain is chargeable - for example because part of the property was let or used solely for business - the reporting obligation applies.

Main home relief and the let-property nuance

Private Residence Relief in sections 222 to 226 TCGA 1992 exempts from CGT the proportion of any gain on a property that has been the taxpayer's only or main residence throughout ownership. Where the property has been the main home for part of the period, the relief is given proportionately, with the final nine months of ownership always treated as occupation regardless of actual use.

An owner who occupies a property as the main home, then lets it, then sells, gets relief for the occupation period plus the final nine months. Letting Relief is now restricted to periods of shared occupation with a tenant under section 223B TCGA 1992 (the broader Letting Relief available before April 2020 was withdrawn for non-shared lettings). A formal Principal Private Residence election under section 222(5) is required where a person owns more than one residence used as a home, and must be made within two years of any change in the combination.

Worked example: a property owned for 15 years was occupied as the main home for 10 years and let for 5 years. On a GBP 200,000 gain, Private Residence Relief covers 10/15ths plus 9 months of the final 9 months of letting, equating to 130.5 of 180 total months, or 72.5% of the gain (GBP 145,000). The chargeable gain is GBP 55,000, against which the AEA of GBP 3,000 applies.

Practical action: keeping records of actual occupation dates, any election letters filed with HMRC, and improvement spend matters. HMRC enquiries on Private Residence Relief most often focus on the factual quality of occupation (was the property genuinely the main home), corroborated by council tax, utility bills, electoral roll registration and correspondence addresses.

Business Asset Disposal Relief and Investors' Relief

Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, applies a reduced CGT rate on qualifying disposals of the whole or part of a trading business, shares in a personal trading company, or assets used in a business after cessation. The lifetime limit is GBP 1 million of qualifying gains. The rate was 10% until 5 April 2025, rose to 14% from 6 April 2025, and rises to 18% from 6 April 2026 under transitional rates set in the Autumn 2024 Budget.

For a share disposal to qualify the individual must have held at least 5% of the ordinary share capital and voting rights, and been an officer or employee of the company, throughout the two-year period ending on the date of disposal. The company must be a trading company or holding company of a trading group. The two-year qualifying period was extended from one year in 2019.

Investors' Relief gives a 10% rate on qualifying gains in unlisted ordinary shares held continuously for at least three years from 6 April 2016, with a lifetime limit reduced to GBP 1 million for disposals from 30 October 2024. The investor must not be an officer or employee of the company.

Worked example: a sole trader sells a business in May 2026 with a chargeable gain of GBP 400,000 after the AEA. With BADR claimed the rate is 18% in 2026/27, a CGT bill of GBP 72,000. Without BADR and at higher-rate income, the bill would be GBP 96,000 at 24%. BADR is claimed on the Self-Assessment return for the year of disposal with supporting computations.

Losses, no-gain transfers and family planning

Capital losses are set against capital gains of the same tax year before the annual exempt amount is applied. Unused losses carry forward indefinitely but only to the extent needed to bring net gains down to the AEA in any future year. A loss must be claimed in writing within four years of the end of the tax year in which it arises under section 16 TCGA 1992, normally by entering it on the Self-Assessment return.

Transfers between spouses or civil partners living together are no-gain, no-loss under section 58 TCGA 1992. The receiving spouse takes over the original base cost. This rule is the basis of routine tax planning to use both annual exempt amounts and to shift gains to the lower-rate spouse before a sale. The transfer must be a genuine outright transfer, not held subject to a side agreement to transfer back; HMRC's view in CG22300 onwards covers the anti-fragmentation principles.

Gifts to children or other non-spouse individuals are disposals at market value and trigger a CGT charge on the donor. Gift Hold-Over Relief under section 165 (business assets) or section 260 (gifts into trust) can defer the gain by passing the donor's base cost to the recipient, but is not available for gifts of investment assets outside specific trust contexts.

Worked example: a higher-rate parent owns a GBP 50,000 share portfolio with GBP 30,000 of unrealised gain. Transferring half to a basic-rate spouse uses section 58. Each then sells in a way that uses both AEAs (GBP 6,000 in total) and stacks the spouse's gain into available basic-rate band at 18%. The combined CGT bill is materially lower than the same disposal made by the parent alone.

Cryptoassets, shares and reporting practicalities

HMRC's Cryptoassets Manual confirms that disposals of tokens are chargeable to CGT for individuals holding them as personal investments. Disposal includes selling for fiat, exchanging one token for another, using tokens to buy goods or services, and gifting (other than to a spouse). Pooling rules in section 104 TCGA 1992 apply: tokens of the same type are pooled and disposals match first against same-day acquisitions, then bed-and-breakfast acquisitions within 30 days, then the pool.

For listed shares similar same-day and 30-day matching rules in sections 105 and 106A TCGA 1992 prevent washing of a gain through a sale and immediate repurchase. Bed-and-ISA is permitted: an immediate repurchase inside an ISA is a separate acquisition outside the matching rules. Spousal transfers are also outside the 30-day rule.

Reporting is required where gains exceed the AEA or where total proceeds across all chargeable disposals exceed four times the AEA (GBP 12,000 for 2026/27), even if the gain itself is within the allowance. The reporting proceeds test catches taxpayers who churn investment portfolios without crystallising large net gains.

Practical action: keeping a transaction log with token name, date, fiat value at acquisition and disposal, exchange fees, and wallet addresses is the only reliable way to compute pooled cost. HMRC's expectation is that taxpayers maintain records sufficient to support the return; the burden of proof in an enquiry sits with the taxpayer under the Taxes Management Act 1970.

Frequently asked questions

What is the CGT annual exempt amount for 2026/27?

GBP 3,000 per individual. The annual exempt amount was reduced from GBP 12,300 in 2022/23 to GBP 6,000 in 2023/24 and to GBP 3,000 from 2024/25 onwards, where it has remained. Trustees receive half the individual amount, GBP 1,500. Gains within the AEA are not taxed; gains above are taxed at 18% or 24% depending on the taxpayer's income band. Where total proceeds across all disposals exceed four times the AEA, a return must be filed even if the gain is within the allowance.

Do I pay CGT on my main home?

Generally no. Private Residence Relief in sections 222 to 226 TCGA 1992 exempts the gain on a property that has been the only or main residence throughout ownership, with the final nine months automatically treated as occupation. Where the property has been the main home for part of the period and let or used for business for another part, the relief is apportioned. An election may be needed where more than one residence is owned. Letting Relief is now restricted to periods of shared occupation with a tenant under section 223B.

How does the 60-day CGT return work?

A UK resident who disposes of UK residential property at a gain must file a CGT on UK property return within 60 days of completion under Schedule 2 Finance Act 2019, and pay the estimated CGT by the same deadline. The return is filed through a dedicated HMRC online account separate from Self-Assessment. The final position is reconciled on the year-end Self-Assessment return, with any adjustment payable or refundable. Late filing attracts the Schedule 55 penalty regime with GBP 100 initial penalty and tax-geared penalties at six and twelve months.

What rate applies to cryptocurrency gains?

The same 18% and 24% rates that apply to other capital gains. HMRC treats personal cryptoasset holdings as chargeable assets under the Cryptoassets Manual. Disposals include sales, swaps, payments for goods, and gifts other than to a spouse. The section 104 TCGA 1992 pooling rules apply, along with same-day and 30-day matching to prevent gain washing. Reporting is on the Self-Assessment return where gains exceed the AEA or where proceeds exceed four times the AEA in the tax year.

Can losses reduce my CGT bill?

Yes. Capital losses are first set against capital gains of the same tax year before the annual exempt amount is applied. Unused losses carry forward indefinitely and are set against future gains down to the AEA. A loss must be claimed in writing within four years of the end of the tax year in which it arises under section 16 TCGA 1992. Losses from connected-person disposals can only be set against gains arising from the same connected person. Investment losses on assets that have become of negligible value can be crystallised by a section 24 claim.

How does Business Asset Disposal Relief work in 2026/27?

BADR gives a reduced CGT rate on qualifying disposals of trading businesses or shares in a personal trading company, subject to a GBP 1 million lifetime limit. The rate is 18% from 6 April 2026, up from 14% in 2025/26 and 10% in earlier years. The two-year qualifying period requires holding 5% of ordinary shares and voting rights and being an officer or employee of a trading company. The relief is claimed on the Self-Assessment return for the disposal year, with the GBP 1 million limit tracking cumulatively across all qualifying disposals.