UK Capital Gains Tax Guide: Rates, Allowances & How to Reduce CGT (2026/27)

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 — even those with modest investment portfolios or a second property. Unlike Income Tax, CGT only applies when you actually sell or dispose of an asset, not while you hold it.

This guide covers the current rates, what’s exempt, and — most importantly — legitimate strategies to reduce your CGT bill. Understanding CGT is essential for anyone with investments outside of ISA or pension wrappers.

CGT Rates (2026/27)

CGT rates were significantly increased in the October 2024 Budget. The rates for shares, crypto, and other non-property assets were raised to match property rates — a substantial hit for investors.

Note: From October 2024, CGT rates were increased from 10%/20% to 18%/24% for non-property assets, aligning them with property rates.

Your CGT rate depends on your total taxable income. If your salary plus gains keeps you within the basic rate band (£37,700 above the Personal Allowance), you pay 18%. Push into higher rate territory and you pay 24% on the portion above. Check your take-home pay to see where you stand.

Annual Exempt Amount

The exempt amount has been slashed from £12,300 to £3,000 in just two years — a 76% reduction. This dramatic cut means investors who previously never worried about CGT now face significant bills when selling shares, funds, or cryptocurrency.

The exemption is “use it or lose it.” You can’t carry unused exemptions to future years, which is why spreading sales across multiple tax years is now essential tax planning. Each adult gets their own £3,000 exemption — couples who invest jointly can shelter £6,000 combined.

How CGT Is Calculated

Capital Gain = Sale Price – Purchase Price – Allowable Costs – Annual Exempt Amount

The calculation is straightforward but the details matter. Allowable costs include broker fees, stamp duty on property purchases, legal fees, and improvement costs — but not maintenance or mortgage interest.

Example: Selling Shares

Suppose you bought £20,000 of shares in 2020 and they’ve grown to £35,000. Here’s how the tax works:

Had these shares been in a Stocks and Shares ISA, the £2,160-£2,880 CGT bill would be zero. This is why maximising your annual ISA allowance is the single best CGT-reduction strategy.

Example: Selling a Second Property

Remember: Second homes and buy-to-let properties trigger a 60-day CGT reporting deadline — much shorter than the Self Assessment deadline for shares. Stamp duty paid when you bought the property is an allowable cost, so keep your completion statement.

CGT by Gain Amount

This table shows the real-world impact of the reduced exemption. For a higher-rate taxpayer selling non-property assets:

| Gain (Before Exemption) | Annual Exemption | Taxable Gain | CGT at 24% |

The £3,000 exemption is almost meaningless for large gains. On a £100,000 gain, it saves just £720 in tax. This is why ISAs, pensions, and spousal transfers are now essential — not optional — for anyone with significant investments.

What’s Exempt From CGT

Several assets are completely exempt from CGT. Understanding these exemptions is the foundation of effective tax planning:

Your main home is almost always fully exempt through Principal Private Residence (PPR) relief. Second homes, buy-to-let properties, and holiday homes are not exempt.

The ISA and pension exemptions are critical. With CGT rates at 24% and the exemption slashed, investing £20,000 per year in a Stocks and Shares ISA could save tens of thousands in future CGT. Similarly, pension contributions not only reduce your Income Tax but ensure all growth is CGT-free.

Allowable Costs That Reduce Your Gain

Keep all receipts for property improvements. A new kitchen, extension, or loft conversion is deductible; repairing a broken boiler is not. The distinction matters: improvements add value permanently, maintenance simply restores existing value. HMRC scrutinises these claims, so documentation is essential.

Strategies to Reduce CGT

With the annual exemption effectively worthless for serious investors, proactive CGT planning is now essential. Here are the most effective strategies:

1. Use Your ISA Allowance

Investments within ISAs grow completely CGT-free:

See our ISA calculator to project growth and understand why this is the most powerful tax shelter available to UK investors. Consider the best investment platforms with low fees to maximise returns.

2. Use Your Annual Exempt Amount Each Year

Sell assets gradually rather than in a single lump:

Spreading sales over multiple tax years saves £1,440-£2,880 in this example. With the exemption at just £3,000, this strategy is less impactful than before — but it’s still free money.

Bed and ISA: You can sell investments, realise gains up to your exemption, then immediately repurchase within your ISA. This “crystallises” gains tax-free and moves assets into the tax-exempt wrapper. Check your platform allows this before attempting.

3. Transfer to Spouse Before Selling

Transfers between spouses are at “no gain, no loss.” If your spouse has unused basic-rate band:

This is the most underused CGT strategy. If one spouse earns significantly less (perhaps on maternity leave, recently retired, or working part-time), transferring assets before sale can shift gains into their lower tax band — or under their personal allowance entirely. The transfer itself is tax-free between spouses.

4. Offset Losses

Capital losses can be carried forward indefinitely:

Always report capital losses even if you have no gains to offset. Losses can be carried forward indefinitely and used against future gains. Many investors forget to report losses and miss out on significant future tax relief.

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:

Business Asset Disposal Relief (BADR)

If you’re selling a business or shares in your personal company:

BADR is a significant relief for business owners but the rate increase from 10% to 14% (effective April 2025) reduced its value. Still, on a £500,000 gain, you save nearly £44,000 compared to the standard 24% rate.

BADR Example

Plan your exit carefully. If you’re approaching the £1 million lifetime limit, consider structuring the sale over multiple years or exploring other reliefs like Investors’ Relief (which has a separate £10 million lifetime limit).

Reporting and Payment

⚠️ The 60-day rule for property is strictly enforced. Late filing attracts automatic penalties starting at £100, and interest accrues on unpaid tax. Report via HMRC’s online “Report and Pay” service — you don’t need to wait for Self Assessment.

Shares and crypto have more leeway: You report these gains on your Self Assessment tax return by 31 January following the tax year (so gains in 2026/27 are reported by 31 January 2028). Use this time wisely to gather records and consider if any dividend or income tax planning can reduce your overall bill.

Key Takeaways

1. CGT rates are 18% (basic) and 24% (higher) for all assets including property
2. The annual exempt amount is just £3,000 — down from £12,300 two years ago
3. ISA and pension investments are CGT-free — prioritise these wrappers
4. Spread sales across tax years to use multiple annual exemptions
5. Transfer to spouse before selling to use their lower rate or exemption
6. Property gains must be reported within 60 days of completion
7. Business Asset Disposal Relief reduces the rate to 14% on up to £1M lifetime gains
8. Capital losses can be carried forward indefinitely — always report them

Related Guides

• Income Tax Brackets UK — Understand how your income affects CGT rates
• Stocks and Shares ISA Guide — How to invest CGT-free
• ISA Calculator — Project your tax-free growth
• Pension Guide — Another CGT-free investment wrapper
• Dividend Tax Guide — Tax on dividend income
• Inheritance Tax Guide — How CGT interacts with IHT
• Stamp Duty Calculator — Costs when buying property
• Best Investment Platforms UK — Where to invest tax-efficiently