How capital gains tax works
Capital gains tax (CGT) is charged on the profit you make when you sell or “dispose of” an asset that has risen in value — not on the sale price itself. Typical disposals include selling shares, second homes, buy-to-let properties, crypto assets, and valuable personal items such as art or antiques. Giving an asset away or swapping it also counts as a disposal at market value, except in a few exempt cases.
The gain is calculated as: Sale price − Purchase price − Allowable costs. Allowable costs include Stamp Duty, legal fees, estate agent fees, and capital improvements to the asset — but not routine maintenance or repairs. Each individual then has an annual exempt amount that is free of CGT. Only gains above the AEA are taxed, and the rate depends on your income tax band.
CGT is reported and paid through self-assessment or, for UK residential property, via a specific 60-day property return submitted to HMRC within 60 days of completion.
2026/27 CGT rates and allowances
Rates were unified for most assets from 30 October 2024 and continue into the 2026/27 tax year.
| Asset type | Basic-rate taxpayer | Higher / additional-rate |
|---|---|---|
| Shares, funds, crypto, other assets | 18% | 24% |
| Residential property (non-main-home) | 18% | 24% |
| Annual exempt amount (individuals) | £3,000 | |
| Annual exempt amount (most trusts) | £1,500 | |
If a gain would straddle your basic-rate band — i.e. your income plus the gain pushes you from basic into higher rate — the portion below the threshold is taxed at 18% and the portion above at 24%. This calculator uses the single rate matching your chosen band for simplicity.
Ways to reduce your CGT bill
Use an ISA wrapper. Gains on investments held inside a Stocks & Shares ISA are entirely free of CGT, and there's no reporting requirement. The £20,000 annual ISA allowance per person makes this the single most effective CGT planning tool for most people.
Transfers between spouses. Transfers of assets between spouses or civil partners are made on a no gain / no loss basis, meaning they don't trigger CGT and the receiving partner inherits the original cost basis. This lets couples double up the annual exempt amount to £6,000 and potentially realise a gain in the hands of a lower-rate taxpayer.
Use your annual exempt amount every year. Because the AEA cannot be carried forward, realising modest gains each year (“bed and ISA” is the classic manoeuvre) can keep future CGT bills down. Selling and immediately repurchasing the same holding outside a tax wrapper within 30 days is caught by share-matching rules — but moving the holding into an ISA avoids that.
Principal Private Residence Relief. PPR exempts gains on your only or main home. If you've owned more than one property, making the correct nomination to HMRC within two years of acquiring a second home can materially change which one gets the relief.