Tax hub

Capital Gains Tax.

Q: Capital gains tax on shares rules

Capital gains tax may be payable when you sell shares – this includes either direct holdings or shares within a mutual fund. But you won’t need to worry about CGT if those shares or funds are held in an ISA or a pension. Importantly, you won’t normally pay CGT on corporate bonds, government bonds or cash accounts. Shares held in an employer’s share incentive plan (SIP) will also be exempt.

Q: Capital gains tax on property rules

Different rules apply when you sell property. In addition to paying a higher rate (28% for higher rate taxpayers and 18% if you pay the basic rate), you also need to report your gain to HMRC within 60 days – you can’t park it until your next tax return. You don’t need to pay CGT when you sell your home (your main or primary residence) – it’s only payable for other properties you might own. This could include a rental property, second home or business premises. If you are selling a rental property that was previously your main home, you might be entitled to claim private residence relief to reduce the size of your bill.

Q: What happens when I sell assets that are owned jointly?

Sometimes you’ll need to sell assets that you own jointly with someone else. In these cases you can both take advantage of your capital gains tax allowance and your capital gains will be based on the proportion of the asset that you own. So, if you own the asset 50/50, the gain will be split equally between you. If you only own say, 25% of the asset, you’d only be liable for 25% of the gain.

Q: What counts as the date of disposal?

When you declare your capital gains you’ll be asked what the date of disposal was. This needs to be the point at which a contract to sell becomes binding. So, in the case of property, that means the date contracts were exchanged and not the date the sale completed.

Q: What happens if I don’t get all the sale proceeds straightaway?

In some cases you may not receive all the sale proceeds straightaway. If you know the amount of money you are likely to receive, you would normally need to factor that into your gains calculations. However, as you may not have the necessary funds to pay your CGT, HMRC may allow you to pay the tax you owe in instalments. Where the exact proceeds are not known, it’s a bit more complicated. You would need to consult HMRC and value each payment separately.

Q: Capital gains tax rules in Scotland. Are they different?

The overall process of capital gains tax is the same in Scotland as the rest of the UK. However, the rates are linked to UK tax bands, not the income tax bands used in Scotland.

Want to understand when you need to pay tax on gains from selling shares and other assets? Learn what capital gains tax is, how it works, and the current rates and allowance.

What is capital gains tax?

Capital gains tax (or CGT) is a tax that may be charged when you sell or give away an asset that has risen in value since you have owned it.

This could include investments, such as funds or shares. CGT may also apply for tangible assets, including valuable artworks, antiques or jewellery, and sometimes even property.

It’s important to note that the CGT isn’t charged on the total value of the asset you have sold, it’s only charged on the gain that you have made.

On this page…

What is capital gains tax and how does it work?
The yearly capital gains tax allowance
Changes to the capital gains tax allowance
What are the capital gains rates in 2024/25?
When is CGT charged?
Do I need to pay CGT on assets I inherit?
How to calculate your capital gains
Capital gains tax FAQs

How does it work?

When you sell assets for a profit, you might need to pay capital gains tax if the profit gains exceed your annual CGT allowance. Remember, you aren’t charged on the total value, just on the additional gains, so you’ll still be able to enjoy the profits.

Capital gains tax exemptions

Some assets are exempt from CGT. For example, you don’t pay CGT on gains from funds, shares, and trusts wrapped inside an ISA, or pension. These types of accounts are especially tax-efficient and can make your investments go further.

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 (2024/25), the CGT allowance is £3,000.

Changes to the capital gains tax allowance

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.
This has now been further reduced to £3,000 in the 2024/25 tax year.

Read our guide on capital gains tax allowance and changes.

What are the capital gains rates in 2024/25?

The rate of capital gains tax that you pay depends on two things: your rate of income tax and the asset you are selling.

Currently higher rate taxpayers will pay 28% if they are selling residential property (but not their main home) or 20% on other chargeable assets.

For basic rate taxpayers those rates drop to 18% and 10% respectively.

It’s important to note though, that 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 and force you to pay CGT at the higher rate.

When is CGT charged?

Capital gains tax is charged when you ‘dispose’ of an asset and your gains exceed the CGT allowance for that tax year. This could be by selling it, but also, if you give it away - even as a gift to unmarried partners, children or grandchildren.

It covers assets you hold in the UK, but also overseas assets, if you are a UK resident.

While income tax may well be deducted from your earnings automatically, it’s your responsibility to calculate and report your capital gains and pay any tax that is owed.

This can be done through your yearly self-assessment tax return or you can use HMRC’s real time Capital Gains Tax Service. The exception is if you have sold a property that isn’t your main home – that would need to be reported separately to HMRC within 60 days of the sale completing.

Late payment penalties are charged if you fail to pay CGT. Depending on your circumstances, this could be as much as 5% of the tax you owe.

Find out more about how Capital Gains Tax works.

What counts as a chargeable asset?

CGT will only ever apply to so-called ‘chargeable assets’.

Chargeable assets include:

Shares and investments
Property that’s not your main home, for example a buy-to-let, second home or holiday let
Business assets
Personal possessions worth over £3,000 – this can include artwork, jewellery, antiques and so on (but not your car)

There are also some assets that you won’t have to pay CGT on.

Non-chargeable assets include:

Assets that you have gifted to a spouse or charity
Investments and shares held in tax wrappers like ISAs, PEPs and pensions
Money that you have won, for example in a lottery or from Premium Bonds
Money in savings accounts and foreign currency

Do I need to pay CGT on assets I inherit?

Whether you inherit a portfolio of shares, a rental property or family heirloom you shouldn’t need to pay CGT straightaway. Instead you may have to pay inheritance tax.

But, if you sell your inheritance further down the line, you might need to pay CGT at that point.

For this reason, it’s important to have an accurate valuation of the asset as soon as you inherit it.

Even though you may not have to pay CGT when you get an inheritance, it’s important to know that you might have to pay other taxes on it over time, such as income tax on rent payments, or dividend tax on investment income. Assets may also be subject to inheritance tax, though this is usually managed by an executor rather than the beneficiaries.

How to calculate your capital gains

To make sure you pay the correct amount of CGT, or indeed whether you need to pay it at all, you need to calculate your gain.

To do this you need to work out the difference between what you paid for your 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 but it’s a bit more complicated with shares that were bought over a period of 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 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 are also able to 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.

When you declare your gains to HMRC, it will tell you how much CGT you will need to pay.

Capital Gains Tax FAQs

Capital gains tax on shares rules

Capital gains tax on property rules

What happens when I sell assets that are owned jointly?

What counts as the date of disposal?

What happens if I don’t get all the sale proceeds straightaway?

Capital gains tax rules in Scotland. Are they different?

The value of your investments may go down as well as up. You may not get back all the money that you invest. If you are unsure about the suitability of an investment product or service, you should seek advice from an authorised financial advisor.

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