UK Capital Gains Tax Guide 2025/26

Understanding UK Capital Gains Tax (CGT) is essential for anyone selling investments, shares, funds, or property. This guide covers how CGT works, rates, exemptions, calculation examples, and planning strategies to reduce liability.

Whether you're a DIY investor managing a portfolio of stocks and ETFs, or selling a second property, this guide provides clear steps to calculate CGT and avoid common mistakes.

What is UK Capital Gains Tax?

Capital Gains Tax is charged on the profit you make when you dispose of certain assets. Disposals include selling, gifting, or exchanging assets. Assets commonly subject to CGT include stocks, shares, mutual funds, and property that is not your primary residence.

CGT Rates in the UK (2025/26)

CGT rates depend on the asset type and your income tax band:

• Most assets: 18% for basic-rate taxpayers, 24% for higher/additional-rate taxpayers.
• Residential property: 18% for basic-rate taxpayers, 24% for higher-rate taxpayers.

Your total taxable gain plus income determines which rate applies. Gains from carried interest follow separate rules (32%).

Exemptions and Allowances

Annual CGT Allowance

Individuals have an annual CGT allowance of £3,000 for 2025/26. Gains below this amount are tax-free.

ISAs and Exempt Assets

Investments held in ISAs are exempt from CGT. Personal belongings under £6,000 (except collectibles) are also generally exempt.

Property Exemptions

Your main residence is usually exempt under Private Residence Relief. Second homes or buy-to-let properties may qualify for Lettings Relief or partial exemptions if conditions are met.

Calculating UK Capital Gains Tax

1. Determine the sale proceeds of the asset.
2. Subtract the original purchase cost (base cost) and allowable costs (brokerage fees, transaction costs, improvements).
3. Deduct the annual CGT allowance (£3,000 for 2025/26).
4. Apply the appropriate CGT rate based on your income tax band and asset type.

Example Calculation

You sold shares worth £50,000 that you originally purchased for £30,000. Allowable costs were £500. Using the annual exemption (£3,000):

• Taxable Gain = £50,000 − £30,000 − £500 − £3,000 = £16,500
• CGT = £16,500 × 18% (basic rate) = £2,970
• Net Proceeds = £50,000 − £2,970 = £47,030

Note: This calculation assumes a single CGT rate is applied. In reality, gains may be split across 18% / 24% bands depending on total taxable income.

You can simplify calculations using the UK Capital Gains Tax Calculator

Common Mistakes When Calculating CGT

• Ignoring allowable costs like transaction fees or improvement costs.
• Forgetting to deduct the annual CGT allowance.
• Misclassifying assets subject to CGT.
• Overlooking foreign currency gains for international investments.

Best Practices for Managing CGT

• Keep detailed records of purchase costs, dates, and disposals.
• Track gains regularly and update calculations when new disposals occur.
• Use tax-efficient accounts like ISAs or pensions to shelter gains.
• Time disposals to use annual exemptions effectively.
• Consult a qualified adviser for complex property or business assets.

Planning and Tax-Efficient Strategies

• Use your annual exemptions each tax year.
• Transfer assets to a spouse or civil partner to utilise their allowance.
• Invest through ISAs or pensions to avoid CGT entirely.
• Offset gains with allowable losses from other disposals.

Related Tools

• Weighted Portfolio Return Calculator – Track investments and estimate portfolio performance.

Related Guides

• Dividend Yield & Income Guide – Forecast dividend income for tax planning.
• Compound Interest & Inflation Guide – Understand growth, inflation, and long-term returns.
• DIY Portfolio Tracking Guide – Manage your portfolio and estimate CGT efficiently.

FAQ

What is Capital Gains Tax (CGT) in the UK?

CGT is a tax on profits from selling assets like shares, funds, or property that is not your primary residence.

How do I calculate Capital Gains Tax on UK investments?

Subtract purchase cost and allowable expenses from sale proceeds, deduct allowances, then apply the relevant CGT rate.

Are there exemptions for UK Capital Gains Tax?

Yes, including the annual CGT allowance (£3,000 for 2025/26), ISAs, and certain business or property disposals.

What are the CGT rates in the UK?

18% or 24% for most assets depending on income band; 18% or 24% for residential property gains.

Can I use a calculator to estimate my CGT?

Yes, the UK Capital Gains Tax Calculator simplifies calculations. Note: This is an estimator only and may not account for all circumstances. For official guidance, refer to HMRC or a qualified tax adviser.

Summary

• CGT applies to gains on investments and property (excluding primary residence).
• Rates depend on income tax band and asset type.
• Use allowances and exemptions to reduce liability.
• Keep detailed records and track disposals carefully.
• Use tools like the CGT Calculator for accurate planning.