Capital Gains Tax (CGT) applies when you sell an asset for more than you paid for it. With the annual exempt amount now just £3,000, more people than ever are caught by CGT. Here’s how it works and how to minimise it.
Table of Contents
CGT Rates (2026/27)
| Asset Type | Basic Rate Taxpayer | Higher/Additional Rate Taxpayer |
|---|---|---|
| Residential property | 18% | 24% |
| Other assets (shares, crypto, etc.) | 18% | 24% |
| Business Asset Disposal Relief (BADR) | 14% | 14% |
| Investors’ Relief | 10% | 10% |
Note: From October 2024, CGT rates were increased from 10%/20% to 18%/24% for non-property assets, aligning them with property rates.
Annual Exempt Amount
| Tax Year | Annual Exempt Amount |
|---|---|
| 2026/27 | £3,000 |
| 2025/26 | £3,000 |
| 2024/25 | £3,000 |
| 2023/24 | £6,000 |
| 2022/23 | £12,300 |
| 2021/22 | £12,300 |
The exempt amount has been slashed from £12,300 to £3,000 in just two years — a 76% reduction.
How CGT Is Calculated
Capital Gain = Sale Price – Purchase Price – Allowable Costs – Annual Exempt Amount
Example: Selling Shares
| Component | Amount |
|---|---|
| Purchase price (2020) | £20,000 |
| Sale price (2026) | £35,000 |
| Gross gain | £15,000 |
| Annual exempt amount | -£3,000 |
| Taxable gain | £12,000 |
| CGT (basic rate, 18%) | £2,160 |
| CGT (higher rate, 24%) | £2,880 |
Example: Selling a Second Property
| Component | Amount |
|---|---|
| Purchase price | £200,000 |
| Stamp duty paid | £1,500 |
| Renovation costs | £15,000 |
| Sale price | £300,000 |
| Estate agent fees | £4,500 |
| Legal fees | £1,500 |
| Gross gain | £77,500 |
| Annual exempt amount | -£3,000 |
| Taxable gain | £74,500 |
| CGT (basic rate, 18%) | £13,410 |
| CGT (higher rate, 24%) | £17,880 |
CGT by Gain Amount
For a higher-rate taxpayer selling non-property assets:
| Gain (Before Exemption) | Annual Exemption | Taxable Gain | CGT at 24% |
|---|---|---|---|
| £3,000 | £3,000 | £0 | £0 |
| £5,000 | £3,000 | £2,000 | £480 |
| £10,000 | £3,000 | £7,000 | £1,680 |
| £20,000 | £3,000 | £17,000 | £4,080 |
| £50,000 | £3,000 | £47,000 | £11,280 |
| £100,000 | £3,000 | £97,000 | £23,280 |
| £250,000 | £3,000 | £247,000 | £59,280 |
What’s Exempt From CGT
| Exempt Asset | Notes |
|---|---|
| Your main home | Principal Private Residence Relief (PRR) |
| ISA investments | All gains within ISAs are tax-free |
| Pension investments | All gains within pensions are tax-free |
| Premium Bond prizes | Tax-free |
| Personal car | Wasting asset exemption |
| Personal possessions under £6,000 | Per item (not total) |
| Gifts to spouse/civil partner | Transferred at no gain/no loss |
| Gifts to charity | Exempt |
| Government gilts and bonds | Exempt |
| NS&I Savings Certificates | Exempt |
Your main home is almost always fully exempt. Second homes, buy-to-let properties, and holiday homes are not exempt.
Allowable Costs That Reduce Your Gain
| Cost | Deductible? |
|---|---|
| Purchase price | Yes |
| Stamp duty (SDLT) paid on purchase | Yes |
| Legal/conveyancing fees (buy and sell) | Yes |
| Estate agent fees on sale | Yes |
| Renovation and improvement costs | Yes |
| Maintenance and repairs | No (only improvements) |
| Mortgage interest | No |
| Insurance | No |
Strategies to Reduce CGT
1. Use Your ISA Allowance
Investments within ISAs grow completely CGT-free:
| Annual ISA Allowance | Invested Over 10 Years | Growth (7%) | CGT Saved (24%) |
|---|---|---|---|
| £20,000/year | £200,000 | ~£80,000 | ~£18,500 |
2. Use Your Annual Exempt Amount Each Year
Sell assets gradually rather than in a single lump:
| Strategy | Gain Realised | Exempt Amount | CGT (24%) |
|---|---|---|---|
| Sell all in one year | £30,000 | £3,000 | £6,480 |
| Sell over 3 years (£10K/yr) | £10,000/yr | £3,000/yr | £5,040 (total) |
| Sell over 5 years (£6K/yr) | £6,000/yr | £3,000/yr | £3,600 (total) |
Spreading sales over multiple tax years saves £1,440-2,880 in this example.
3. Transfer to Spouse Before Selling
Transfers between spouses are at “no gain, no loss.” If your spouse has unused basic-rate band:
| Scenario | CGT Rate | CGT on £20,000 Gain |
|---|---|---|
| You sell (higher rate) | 24% | £4,080 |
| Transfer half to spouse (basic rate) | 18% on £10K + 24% on £10K | £3,360 |
| Transfer all to non-working spouse | 18% | £3,060 |
| Saving | Up to £1,020 |
4. Offset Losses
Capital losses can be carried forward indefinitely:
| Year | Gain | Loss | Net Gain | CGT |
|---|---|---|---|---|
| Year 1 | £15,000 | -£8,000 | £7,000 | £960 (after £3K exemption) |
| Year 2 | £10,000 | £0 | £10,000 | £1,680 |
| Without loss offset | £15,000 | — | £12,000 | £2,160 |
5. Pension Contributions to Lower Your Rate
If you’re near the higher-rate threshold, pension contributions can push you into the basic-rate band:
| Income | Gain | Without Pension | With £5K Pension Contribution |
|---|---|---|---|
| £52,000 | £20,000 | Mostly at 24% | More at 18% |
Business Asset Disposal Relief (BADR)
If you’re selling a business or shares in your personal company:
| Feature | Detail |
|---|---|
| CGT rate | 14% (was 10%) |
| Lifetime limit | £1,000,000 |
| Qualifying period | 2 years ownership |
| Applies to | Business, partnership share, company shares (5%+ holding) |
BADR Example
| Business Sale Price | Costs | Gain | CGT at 14% (BADR) | CGT at 24% (without BADR) | Saving |
|---|---|---|---|---|---|
| £500,000 | £50,000 | £447,000 | £62,580 | £106,560 | £43,980 |
| £1,000,000 | £100,000 | £897,000 | £125,580 | £214,560 | £88,980 |
Reporting and Payment
| Situation | Reporting Deadline | Payment Deadline |
|---|---|---|
| UK residential property sale | 60 days after completion | 60 days |
| Other assets (shares, crypto, etc.) | Self Assessment (31 January) | 31 January following tax year |
| Loss (for carry-forward) | Self Assessment within 4 years | N/A |
⚠️ The 60-day rule for property is strictly enforced — late filing attracts penalties.
Key Takeaways
- CGT rates are 18% (basic) and 24% (higher) for all assets including property
- The annual exempt amount is just £3,000 — down from £12,300 two years ago
- ISA and pension investments are CGT-free — prioritise these wrappers
- Spread sales across tax years to use multiple annual exemptions
- Transfer to spouse before selling to use their lower rate or exemption
- Property gains must be reported within 60 days of completion
- Business Asset Disposal Relief reduces the rate to 14% on up to £1M lifetime gains
- Capital losses can be carried forward indefinitely — always report them
