Capital Gains Tax: what is taxed, allowances and rates

Capital Gains Tax is a tax on the profit when you sell something that has increased in value, not on the whole amount you receive for it¹. If you buy shares for £5,000 and sell them for £8,000, the taxable event is the £3,000 gain, not the £8,000 sale. You only pay the tax on profits above your Annual Exempt Amount, which is £3,000 per person², and the rates for most assets are 18% if you are a basic rate income taxpayer and 24% if you are a higher rate taxpayer³.

One point catches many people out: HMRC does not send a bill for Capital Gains Tax⁴. Working out whether a gain is taxable, reporting it and paying what is due is your responsibility, and the deadlines are short for property sales, at 60 days, and annual for everything else, through Self Assessment. Around 500,000 taxpayers are required to report disposals each year⁵.

A tax on the gain, not the sale price

The starting point is simple: the tax is charged on the profit you make when you sell or dispose of an asset, not on the money that changes hands¹. "Disposal" is wider than a sale. It includes giving an asset away, exchanging it, or otherwise getting value from it, and each of these can create a taxable gain even if no cash reaches your bank account.

The gain itself is the difference between what the asset was worth when you acquired it and what it was worth when you disposed of it, after deducting certain allowable costs. You only pay tax on the part of your total gains that sits above the Annual Exempt Amount for the year². Someone with total gains of £3,000 or less in a tax year, and no other reason to file, generally has nothing to pay, though there are still situations where a report is needed, as explained later in this page.

Because there is no bill, the system depends on you recognising that a taxable event has happened⁴. This is where people come unstuck: an asset sold casually, a possession auctioned, or shares cashed in to fund a purchase can all create a reporting obligation that goes unnoticed until HMRC asks about it. The rules on undeclared income and how far back HMRC can go apply here too.

What is taxed: property, shares, business assets and valuable possessions

The most common taxable assets fall into a few groups. Property that is not your home is the big one: buy-to-let properties, business premises, land and inherited property can all create a taxable gain when sold⁷. Shares are next, including shares bought on the open market and shares acquired through work, and business assets sold by the self-employed and company owners.

Valuable personal possessions can also be taxable. HMRC lists jewellery, paintings, antiques, coins and stamps, and sets of things such as matching vases or chessmen as possessions you may need to pay tax on⁹. There is a threshold: a possession only comes into the charge if the disposal proceeds are £6,000 or more, and each owner is exempt on the first £6,000 of their share if the item is jointly owned⁹.

Shares that come from your employer have their own cost rules. The capital gains cost of shares from an employee share scheme is generally what you pay for them when you exercise an option, and for some schemes it also includes amounts charged to Income Tax on exercise¹⁰. If you exercise an Enterprise Management Incentive option, the cost is what you pay for the shares together with any amount charged to Income Tax¹⁰. The details are in HMRC's helpsheet on employee share schemes and Capital Gains Tax.

Inherited assets are a special case at the moment of inheritance. When someone dies, the assets that pass on are rebased, so the person receiving them is treated as acquiring them at their value at the date of death. But once you own them, you may have to pay other taxes on what you have inherited, including Income Tax and Capital Gains Tax, when you later dispose of them¹¹. There is also a measure aimed at non-domiciled individuals, which ensures value built up on UK company securities is taxed in the UK even when those securities are exchanged for securities in an offshore holding company¹².

What you do not pay it on: your home, ISAs, your car and gifts to a spouse or charity

Several everyday assets and transfers sit outside the charge. The most valuable exemption for most people is the family home: you may get tax relief if you sold a property that was your main home, which is covered in more detail under Private Residence Relief⁴. ISAs are also outside the tax: individuals do not pay tax on capital gains arising on their disposals of ISA investments¹³, which is one of the main reasons people use ISAs for investing.

Your car is exempt unless you have used it for business⁹. Gifts to your husband, wife or civil partner are usually not taxed, and gifts to a charity are usually not taxed either⁷. Transfers between spouses and civil partners are a common and legitimate planning point, and the rules around them are covered on the page about gifting assets.

Two cautions apply. First, "usually" is doing work in those sentences: there are conditions, and gifts to a spouse who is not UK resident, or gifts with strings attached, can be treated differently. Second, some things that look like capital gains are not. Chargeable event gains on life insurance policies are not capital gains, so capital losses and the annual exempt amount cannot be set against them¹⁴. They are taxed under their own rules instead.

Annual exempt amount: £3,000 per person

Every individual has an Annual Exempt Amount: gains below it are not taxed, and only the excess above it is chargeable². For individuals and personal representatives the amount is £3,000⁶. For most trustees it is half that, £1,500⁶. The same £3,000 figure was confirmed in the Autumn Budget 2024 rates and allowances document¹⁵, so it has been stable across recent years.

The allowance has not always been this low. It was reduced from £12,300 to £6,000 and then to £3,000 under policy decisions that also cut the dividend allowance¹³, and the Resolution Foundation notes the earlier figure was £12,300¹⁶. The practical effect of the cut is that many more people cross the threshold where a report is required, including people selling modest shareholdings or a single valuable possession who would previously have been well within the old allowance.

The allowance is per person, per tax year. It cannot be carried forward: if your gains are under £3,000 one year, the unused part does not add to the next year's allowance. Married couples and civil partners each have their own £3,000, which is why transferring an asset to a spouse before selling it can matter, as the gifting assets page explains. Trusts have their own rules, covered on the page about how trusts are taxed, and a trust or estate must report when its total taxable gains, after losses, exceed its annual exempt amount¹⁷.

Capital Gains Tax rates: 18% and 24% depending on your income tax band

For gains on assets other than residential property and carried interest, the rates follow your income tax band: 18% if you are an Income Tax basic rate payer and 24% if you are a higher rate payer³. These rates apply to disposals made on or after 30 October 2024; before that date the rates on such assets were lower, and the change was one of the headline measures of Autumn Budget 2024¹³.

Two special rates sit alongside these. Gains on carried interest are taxed at 32%³. Gains that qualify for business asset disposal relief are taxed at 14%³, a rate that has been stepped up over time: the relief rate was increased from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026¹³. So the rate that applies depends on when the disposal was made as well as whether it qualifies.

Scotland needs a note here. Capital Gains Tax is a UK-wide tax with UK-wide rates, but the income tax bands that decide whether you are a basic or higher rate taxpayer are set differently in Scotland, where the basic rate is 20% on income between £15,398 and £27,491 and the higher rate is 42% on income between £43,663 and £75,000 for the 2025 to 2026 tax year¹⁸. Because the CGT rate you pay depends on where your income lands, Scottish bands can change which CGT rate applies to your gain. The page on income tax explains the bands in full.

One further relief change is worth knowing if you are a business owner: capital gains tax relief on qualifying disposals to employee ownership trusts was reduced from 100% to 50% for disposals from 26 November 2025¹⁹.

Working out your gain, including costs and losses

To work out a gain you need the details of how much you bought and sold the asset for, the dates you took ownership and disposed of it, other relevant details such as the costs of buying, selling or making improvements and any tax reliefs, and the calculations for each gain or loss you report⁴. Allowable costs are deducted from the proceeds: the acquisition cost, the costs of buying and selling, such as legal fees and stamp duty where they qualify, and the cost of improvements that are reflected in the state of the asset when sold.

Each deduction narrows the amount that is finally taxed.

Losses matter as much as gains. If you sell an asset for less than it cost, that loss can be set against your gains in the same year, and unused losses can be carried forward against future gains. Losses must be claimed within four years of the end of the tax year in which they arose, and the page on capital losses covers the claim deadline and how registration works. Deducting losses before the annual exempt amount is the right order, because the exempt amount would otherwise be wasted on gains that losses could have covered.

Employee shares deserve a repeat warning here because the cost is not always what you might expect. For company share option plans and savings-related share option schemes, the capital gains cost of your shares is usually what you pay for them when you exercise your option¹⁰. For other options, the cost is the total of what you pay for the option, the price you pay for the shares when you exercise, and the amount chargeable to Income Tax on the exercise¹⁰. Getting this wrong overstates the gain.

Finally, remember the boundary with chargeable event gains: gains on UK and foreign life insurance policies are not capital gains, so capital losses and the annual exempt amount cannot be set against them¹⁴. If you are not within Self Assessment and such a gain, together with your other savings and investment income, does not exceed £10,000, you can report it by contacting HMRC's Self Assessment team or by sending the chargeable event certificate with your National Insurance number²¹.

Selling your main home or a second property

The rules split sharply between your main home and everything else. You may get tax relief if you sold a property that was your main home⁴, and that relief, Private Residence Relief, is what keeps most people's family homes out of the charge. The dedicated page on selling a home that was not your main residence works through what happens when the relief only covers part of the gain.

Second homes, buy-to-let properties, business premises, land and inherited property are all potentially chargeable⁷. Two reliefs can reduce the bill: you may get tax relief if the property is a business asset⁷, and if the property was occupied by a dependent relative you may not have to pay⁷. Neither is automatic, and both depend on the facts of how the property was used.

Non-residents selling a UK home face their own version of the rules. You may have to pay tax when you sell or dispose of your UK home if you are not UK resident for tax purposes²². To qualify for relief on the home you must nominate it as your only or main home when you tell HMRC you have sold it²². If you are disabled or in long-term residential care, the final period that counts is 36 months²². The wider rules on residence are on the page about moving abroad.

How to report and pay Capital Gains Tax

How you report and pay depends on whether you sold residential property in the UK⁴. That is the single most important fork in the process, because the property route has its own service, its own return and a much shorter deadline, while everything else flows through Self Assessment.

For gains other than UK residential property, the route is a Self Assessment tax return, using the capital gains pages. HMRC's guidance on help with capital gains on your Self Assessment tax return sets out what you need¹, and the page on how to report and pay Capital Gains Tax walks through the steps. If you do not normally file a return, a taxable gain is one of the events that means you must register for Self Assessment, as the page on registering explains.

Some specific situations have their own helpsheets. Employee share schemes are covered by HS287¹⁰. Gains on foreign life insurance policies have HS321, which also covers how joint owners split a gain: joint owners are treated as having equal shares, and spouses or civil partners each enter half the gain on their own return²¹. Venture Capital Trusts have HS298, which covers disposal relief, deferral relief, when a deferred gain is revived, and how the reliefs interact²³. Capital payments from non-resident trusts have HS301.

The scale of the system is worth knowing. HMRC publishes accredited official statistics on Capital Gains Tax, giving breakdowns of the number of taxpayers, gains and tax liabilities by year of disposal²⁴, and the annual statistics published on 27 August 2026 included data on crypto investors²⁵. Around 500,000 taxpayers are required to report disposals each year⁵, a number the Office of Tax Simplification highlighted when reviewing how the tax's administration could be made simpler.

One situation people rarely see coming: compensation for mis-sold investments. If you receive compensation for investment or pensions loss, the business will not deduct Capital Gains Tax for you²⁶, and where compensation for financial loss is taxable you need to tell HMRC or declare it on a Self Assessment return, as the compensation will not have the tax deducted at source²⁷.

Deadlines: 60 days for UK residential property, 31 January for other gains

For most sales of UK property on or after 6 April 2020, you must report and pay any Capital Gains Tax within 60 days⁷. The clock starts when the sale completes, and the 60-day return and payment run through HMRC's property reporting service. Because a house purchase typically takes 6 to 8 weeks to reach completion, some sellers find themselves making the report almost immediately after the money arrives.

Property gains are due within 60 days; other gains are due with Self Assessment.

For everything else, the gain is added up over the tax year and the tax is paid through Self Assessment by midnight on 31 January following the tax year you are paying for⁸. The same 31 January deadline applies to shares from a Share Incentive Plan: Capital Gains Tax is payable on 31 January after the end of the tax year in which the shares are sold²⁹. The pages on payments on account and late filing penalties cover what happens around the Self Assessment cycle.

Non-residents have the tightest rule of all. If you are not a UK resident you must report all sales of UK property or land, residential and non-residential, even if you have no tax to pay³, and for a UK home you must tell HMRC within 60 days of transferring ownership²². If you live abroad you do not normally pay tax when you sell an asset, apart from on UK property or land³⁰. ===

If you disagree with HMRC's view of a disposal, the appeal route runs first through HMRC and then to the First-tier Tribunal (Tax Chamber), with a time limit of 30 days from a view of the matter letter in direct tax cases³¹. The page comparing an HMRC internal review with the tax tribunal sets out the routes.

Inherited assets, death and business asset disposal relief

Death itself is not a Capital Gains Tax event for the person who has died: their assets are treated as disposed of and immediately reacquired at their value at death, so the estate and the beneficiaries start from a clean base. What you may have to pay after inheriting is different: you may face Inheritance Tax on the estate, and then Income Tax and Capital Gains Tax on what you have inherited when you later receive income from it or sell it¹¹. The pages on inheritance tax and on gifts and the seven-year rule cover the estate side.

Business asset disposal relief, formerly entrepreneurs' relief, is the main reduced-rate relief for people selling a business or a substantial shareholding in one. Qualifying disposals are charged at 14%³, on a rising path: 10% for gains up to April 2025, 14% for gains between April 2025 and April 2026, and 18% thereafter¹³. The relief is heavily concentrated: around two thirds of gains and tax paid at the BADR rate came from the 21% of individuals with qualifying gains of £500,000 or more³².

On the Inheritance Tax side, instalments can ease the cash burden on an estate: you can pay in instalments on the net value of a business run for profit, for any asset that qualifies for Agricultural Relief or Business Relief, and if the shares or securities allowed the deceased to control more than 50% of a company³³. You must say on Inheritance Tax account form IHT400 if you want to pay in instalments³³. These are Inheritance Tax rules, not Capital Gains Tax rules, but they often arise in the same circumstances as a business disposal.

Finally, if you have come to the UK or left it, residence drives everything. You pay tax if you made a profit on selling or disposing of certain assets, such as shares or a second home, when you are UK resident², and the rules for non-residents are as described above. The page on residence and moving abroad covers how residence status is decided.