Capital Gains Tax: What it is, how it works and the current rates
Want to understand when you need to pay tax on gains from selling shares, property and other assets? This guide will explore Capital Gains Tax, its thresholds, and the current rates and tax-free allowance.
What you'll learn in this guide...
- An overview of how Capital Gains Tax works, including allowances, exemptions, and the latest 2025/26 rates
- Clear guidance on CGT rules for property, shares, and inherited assets, plus how to calculate your gains
- Practical advice on declaring CGT and answers to frequently asked questions
Jump to...
- What is Capital Gains Tax?
- How does Capital Gains Tax work?
- The yearly Capital Gains Tax allowance
- Changes to the Capital Gains Tax allowance and rates
- What are the capital gains rates in 2025/26?
- What do you need to pay CGT on?
- Do you pay CGT on assets you inherit?
- Capital Gains Tax exemptions
- Capital Gains Tax on shares rules
- CGT on property rules
- How to calculate your capital gains
- How to declare Capital Gains Tax
- CGT FAQs
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax that may be charged when you sell or give away an asset that has increased in value since you bought it.
This could include investments, such as funds or shares. CGT may also apply to tangible assets, including valuable artworks, antiques, jewellery, and property that isn’t your main residence.
It’s important to note that CGT is a tax on the gain you make, not the total value of the asset. For example, if you bought an antique for £15,000 and sold it for £25,000, you'd make a gain of £10,000. That gain may be liable to CGT. The amount of CGT you pay also depends on your income.
How does Capital Gains Tax work?
When you sell assets for a profit, you may need to pay Capital Gains Tax (CGT). CGT is only due if your gain exceeds the tax-free allowance of £3,000. Remember, you’re taxed only on the profit, not the total value of the asset. It applies to assets you hold in the UK as well as overseas assets, if you’re a UK resident.
‘Disposing’ means selling an asset or giving it away; even as a gift to unmarried partners, children, or grandchildren. Gifts to your spouse or civil partner are generally exempt from CGT. However, if they later dispose of the asset, they may be liable to pay CGT if they make a gain.
Unlike income tax, CGT is not usually deducted automatically. It’s your responsibility to calculate and report your capital gains, and pay any tax that is owed.
Learn more about how Capital Gains Tax works.
The yearly Capital Gains Tax allowance
You don’t need to pay tax on all your gains. Each year, you have a capital gains allowance, and it’s only when you go over this allowance that CGT becomes payable.
In the current tax year (2025/26), the CGT allowance is £3,000. This allowance remains the same as the 2024/25 tax year.
Read more: How to reduce your Capital Gains Tax bill in 2025.
Changes to the Capital Gains Tax allowance and rates
In the 2022 Autumn Statement, the UK Chancellor announced significant reductions to the Capital Gains Tax allowance.
In April 2023, the CGT allowance was cut from £12,300 to £6,000. It was further reduced to £3,000 in the 2024/25 tax year and will remain for the 2025/26 tax year.
Changes to Capital Gains Tax rates:
- The 10% basic rate has increased to 18% for disposals made on or after 30 October 2024
- The 20% higher rate has increased to 24% for disposals made on or after 30 October 2024
- The 20% rate that applies to gains accruing to trustees and personal representatives has increased to 24% for disposals made on or after 30 October 2024
- The 10% rate that applies to Business Asset Disposal Relief and Investors’ Relief has increased to 14% for disposals made on or after 6 April 2025, and will rise to 18% from 6 April 2026
Read more about Capital Gains Tax allowances and changes.
What are the capital gains rates in 2025/26?
The amount of Capital Gains Tax you pay depends on the income tax band the taxable gain falls into.
| Tax band | CGT % rate |
| Basic rate | 18% |
| Higher rate and additional rate | 24% |
Please note: your gains will be added to your income for the year. This means that your capital gain might push you into the higher-rate tax band; the current CGT rates remain the same for the tax year 2025/26.
What do you need to pay CGT on?
Assets like property, shares or antiques may be chargeable if you dispose of them. CGT will only ever apply to so-called ‘chargeable assets’.
Chargeable assets include:
- Shares and investments - unless held in a tax-efficient account like an ISA or a pension
- Property that’s not your main home - for example, a buy-to-let, second home or holiday let
- Business assets - like land, buildings, fittings, fixtures and registered trademarks
- Personal possessions worth over £6,000 - including artwork, jewellery, antiques (but not your car)
- Cryptocurrency - falls under the general CGT allowance; if the gains are over £3,000, Cryptocurrency is a chargeable asset
Do you pay CGT on assets you inherit?
When you inherit shares, a rental property, or a family heirloom, you don’t need to pay CGT straightaway. Instead, you may face inheritance tax.
However, you might need to pay CGT if you sell your inheritance later.
This is why it's crucial to get an accurate asset valuation right after inheriting it.
Even if CGT isn’t due at the time of inheritance, you should know that other taxes may apply over time. For example, you could pay income tax on rent or dividend tax on investment income. Inheritance tax may also apply, but usually, an executor handles this, not the beneficiaries.
Capital Gains Tax exemptions
Not all assets are ‘chargeable’. As well as the annual CGT exemption of £3,000, there are certain assets that you don't have to pay CGT on. For example, you don’t pay CGT on gains from funds, shares, and trusts held within an ISA or pension. These accounts are especially tax-efficient, as they shelter your earnings from CGT and can make your investments go further.
Non-chargeable assets include:
- Gift to UK-registered charities
- Assets you give or sell to a spouse/civil partner, as long as you’re living together
- Investments and shares held in tax wrappers like ISAs and pensions
- Government bonds, otherwise known as gilts
- Money that you have won, for example, in a lottery or from Premium Bonds
- Money in savings accounts and foreign currency
- Your car, unless used for business
If you own a possession with another individual, you’re exempt from paying tax on the first £6,000 of your share.
Important information: Tax treatment depends on your individual circumstances and may be subject to change in the future. This guide isn't intended as personal tax advice - if you need this, please contact a suitably qualified tax adviser.
CGT on property rules
Different rules apply when selling a property.
You must to report your gain to HMRC within 60 days. You cannot wait until your next tax return.
You don’t pay CGT when selling your home, provided it's your main residence. CGT applies only to other properties you own, such as rental properties, a second home, or business premises.
What counts as a primary residence?
You won't pay CGT when you sell a property if you lived there as your main home for the entire time you owned it.
- Your main residence is the home where you spend most of your time
- Only one property at a time can be classed as your primary residence - this is where you live, not just own
What if you inherit property?
You will not pay CGT right away when inheriting a property. If you inherit a property which results in you owning two, you must inform HMRC which one is your primary residence within two years.
Other taxes that need to be considered in relation to property sales
Capital Gains Tax becomes liable only when an inherited property is sold for a profit. The homebuyer will also be liable to pay stamp-duty costs - not the seller.
How to calculate your capital gains
To ensure you pay the correct amount of CGT, or determine whether you need to pay it all, you must calculate your gain.
To do this, you need to work out the difference between what you paid for the asset (or its value when you received it) and what it was worth when you sold or disposed of it.
This should be reasonably straightforward with personal possessions or property. However, it’s a bit more complicated with shares bought over time.
As shares are likely to have been bought at different prices over time, you’ll need to work out an average cost for your shares. Whatever the asset you are selling, there may be costs that you can deduct from your gains. These could include:
- Home improvements on a property (though not maintenance)
- Estate agents and solicitor fees
- Costs you incur when buying and selling shares
- The cost of selling personal possessions. This would cover any charges for advertising or selling them, but not any repairs
You can also offset any losses you have made against your gains. These are called allowable losses. You’ll only need to pay CGT when your gains, after losses and charges, exceed the Capital Gains Tax allowance.
Declaring your gains to HMRC will tell you how much CGT you will need to pay.
How much Capital Gains Tax would you pay?
Example 1:
Lucy purchased a property in 2004 for £150,000; its market value is now £250,000. If she sells, she has made a capital gain of £100,000. The capital gain of £100,000 is what will be liable to CGT.
The CGT allowance is £3,000. Therefore, Lucy deducts £3,000 from her £100,000 gain.
The total taxable gain is £97,000. When calculating other deductions, Lucy considers estate agent and solicitor fees and home improvement fees (though not maintenance). Her final gain total will then be taxed as per her tax rate.
Example 2:
You must calculate an average share cost, as shares will likely be bought at different prices.
Lucy has invested £12,000 in shares and has recently sold them for £18,000. Lucy must deduct any fees, specifically trading fees, for the shares from the gain amount. Her total gain is £5,992. She has an annual allowance of £3,000, which is deducted from the gain, leaving £2,992. Her final gain total will be taxed as per her tax rate.
Do you need to pay Capital Gains Tax?
Remember, gains within the CGT allowance (£3,000) are tax-free. You’re not liable to pay CGT on gifts between spouses and civil partners, and your main residence is usually also exempt from CGT.
You can also offset any losses you have made against your gains. These are called allowable losses. You’ll only need to pay CGT when your gains, after losses and charges, exceed the Capital Gains Tax allowance.
Declaring your gains to HMRC will tell you how much CGT you will need to pay.
How to declare Capital Gains Tax
Declaring your CGT can be done through your yearly Self-Assessment tax return or using HMRC’s Real-time Capital Gains Tax Service.
Capital gains on shares and assets - excluding property - must be reported by 31 December in the tax year after the gain, but you can report them earlier.
You have until 31 January to pay - precisely one month after the report deadline. You must report and pay any CGT on UK property within 60 days of the sale.
Late payment penalties are charged if you fail to send your tax return or miss the deadline. There will be an initial £100 penalty, and after three months, additional daily penalties of £10 will be charged, up to a maximum of £900. After 6 months, a penalty of 5% or £300, whichever is greater, will be charged. After 12 months, the penalty of 5% or £300 will be charged again.
Capital Gains Tax FAQs
Learn more about tax
Understanding Capital Gains Tax
Capital Gains Tax rates and allowances
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