Capital Gains Tax UK: Property, Shares and Investments
Introduction
Capital Gains Tax (CGT) is charged on the profit you make when you sell or dispose of an asset that has increased in value. This guide explains how CGT works in the UK, the current rates and exemptions for 2025/26, and how to calculate and report your gains.
Understanding CGT is essential if you sell property, shares, or other valuable assets.
What Is Capital Gains Tax?
CGT is a tax on the gain (profit), not the full sale price. You calculate it as:
Sale price - Original cost - Allowable costs = Gain
You only pay CGT on gains above your annual exempt amount. Losses can be used to reduce gains.
Annual Exempt Amount for 2025/26
For the 2025/26 tax year, the Annual Exempt Amount (also called the CGT allowance) is £3,000.
Recent reductions
| Tax year | Annual Exempt Amount |
|---|---|
| 2022/23 | £12,300 |
| 2023/24 | £6,000 |
| 2024/25 | £3,000 |
| 2025/26 | £3,000 |
The significant reduction means more people now pay CGT on asset disposals.
How the exemption works
- Gains up to £3,000 are tax-free
- Only gains above £3,000 are taxed
- You cannot carry forward unused allowance to future years
- Each individual has their own allowance
CGT Tax Rates for 2025/26
CGT rates depend on what type of asset you sell and your Income Tax band.
Residential property (not your main home)
| Tax band | CGT rate |
|---|---|
| Basic rate taxpayer | 18% |
| Higher/additional rate taxpayer | 24% |
Other assets (shares, investments, etc.)
| Tax band | CGT rate |
|---|---|
| Basic rate taxpayer | 10% |
| Higher/additional rate taxpayer | 20% |
Determining your rate
Your CGT rate depends on your total taxable income plus the gain:
- If income + gain stays within the basic rate band (up to £50,270), you pay the lower rate
- If it pushes you into higher rate territory, you pay the higher rate on the excess
- A single gain can be split across both rates
Assets Subject to CGT
You may pay CGT on
- Residential property (buy-to-let, second homes, inherited property)
- Shares and investments (outside ISAs and pensions)
- Business assets (goodwill, equipment, intellectual property)
- Cryptocurrency (Bitcoin, Ethereum, NFTs)
- Valuable personal possessions worth over £6,000 (antiques, art, jewellery)
- Foreign assets
Assets exempt from CGT
- Your main home (Principal Private Residence Relief)
- ISAs and pensions (tax-free wrappers)
- UK government gilts and premium bonds
- Betting and lottery winnings
- Cars (including classic cars)
- Personal possessions worth £6,000 or less each
- Gifts to charity
- Transfers between spouses/civil partners
Selling Residential Property
Selling a property other than your main home is a common CGT event.
Calculating the gain
- Sale price received
- Minus purchase price (including stamp duty and legal fees)
- Minus improvement costs (extensions, renovations - not repairs)
- Minus selling costs (estate agent fees, legal fees)
- Equals chargeable gain
Reporting and payment deadline
If you sell a UK residential property and make a chargeable gain, you must:
- Report it to HMRC within 60 days of completion
- Pay any CGT due within the same 60-day period
- Use HMRC's Report and pay Capital Gains Tax on UK property service
This is in addition to reporting on your Self Assessment return.
Principal Private Residence Relief
If you sell your main home, it is usually exempt from CGT. However, partial relief may apply if:
- You have let out part of the property
- You have been absent for extended periods
- You have used it for business
Selling Shares and Investments
Calculating gains on shares
For share sales, you need to identify which shares you sold using HMRC's matching rules:
- Same-day rule - Shares bought and sold on the same day
- 30-day rule - Shares bought within 30 days of sale (bed and breakfasting rule)
- Section 104 pool - Average cost of remaining shares acquired before sale
Example
If you buy 100 shares at different times for different prices, you calculate the average cost per share from your Section 104 pool to work out your gain.
Reporting share sales
Report share gains on your Self Assessment tax return. Unlike property, there is no 60-day reporting requirement.
Allowable Costs
You can deduct these costs from your gain:
Purchase costs
- Original purchase price
- Stamp duty or SDLT
- Legal fees on purchase
- Survey fees
Improvement costs
- Extensions and major renovations
- Planning permission fees
- Professional fees for improvements
Selling costs
- Estate agent fees
- Legal fees on sale
- Marketing costs
What you cannot deduct
- Maintenance and repairs
- Mortgage interest
- Insurance premiums
- Furniture and fittings (unless included in sale)
Using Losses to Reduce CGT
If you make a loss on a disposal, you can use it to reduce gains.
How loss relief works
- Losses must be reported to HMRC to be used
- Current year losses must be used first (even if it wastes your annual exemption)
- Unused losses can be carried forward indefinitely
- You cannot create or increase a loss artificially
Example
- Gain on property: £20,000
- Loss on shares: £5,000
- Annual exemption: £3,000
- Taxable gain: £20,000 - £5,000 - £3,000 = £12,000
CGT Reliefs
Several reliefs can reduce or eliminate CGT:
Business Asset Disposal Relief (BADR)
- 10% CGT rate on qualifying business disposals
- Lifetime limit of £1 million in gains
- Must meet ownership and participation conditions
Investors' Relief
- 10% rate on qualifying shares in unlisted trading companies
- Lifetime limit of £10 million
- Shares must be held for at least 3 years
Rollover Relief
- Defer CGT when you sell a business asset and reinvest in another
- The gain is deferred until the replacement asset is sold
Gift Hold-Over Relief
- Defer CGT when you gift business assets or certain shares
- The recipient takes on your original cost base
How to Report CGT
Self Assessment
Report gains on your Self Assessment tax return in the Capital Gains section. You need:
- Details of each disposal
- Purchase and sale dates
- Costs and proceeds
- Any reliefs claimed
Real Time Reporting (Property)
For UK residential property:
- Report within 60 days of completion
- Use HMRC's online service
- Pay estimated CGT
- Reconcile on your annual tax return
How QTax Helps
QTax supports you with Capital Gains Tax by:
- Calculating gains on property and investment sales
- Applying the correct tax rates based on your income
- Ensuring the annual exempt amount is used efficiently
- Helping you report gains correctly on your tax return
FAQs
Do I pay CGT on my main home?
Usually no. Your main home is exempt under Principal Private Residence Relief. However, partial gains may be chargeable if you let out part of it or were absent for extended periods.
Can I transfer assets to my spouse to reduce CGT?
Yes, transfers between spouses are CGT-free. This allows you to use both annual exemptions and potentially have gains taxed at a lower rate.
What if I make a loss?
Report the loss to HMRC. You can use it to offset gains in the same year or carry it forward to future years.
How do I report cryptocurrency gains?
Crypto gains are reported in the Capital Gains section of your Self Assessment return. They are taxed at 10%/20% (not property rates) as they are not residential property.
Conclusion
Capital Gains Tax affects many people who sell property, shares, or other valuable assets. With the reduced annual exemption, more gains are now taxable. Understanding the rules, using available reliefs, and reporting correctly helps you manage your CGT liability effectively.
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