Last updated: May 2026 · Sourced from official UK government publications
This is a plain-English definitions guide. All rates and rules are drawn from HMRC and gov.uk official sources. This is not financial advice, see the disclaimer below.
Capital Gains Tax (CGT) is a tax on the profit you make when you sell, or ‘dispose of’, an asset that has gone up in value. It’s not a tax on the total amount you receive, just the gain. Here’s how it works in plain English.
Capital Gains Tax (CGT) is a tax on the profit you make when you sell an asset that has increased in value, not on the full sale price. If you buy something for £10,000 and sell it for £18,000, CGT is charged on the £8,000 gain. CGT applies to shares, investment funds, second properties, and certain personal possessions worth over £6,000 (such as jewellery or art). It does not apply to your main home (with some exceptions), ISAs, pensions, or UK government bonds (gilts).
The CGT annual exempt amount is the tax-free allowance for capital gains in a single tax year. For 2025/26 it is £3,000, you only pay CGT on gains above this threshold. This allowance has been cut sharply from £12,300 in 2022/23, significantly increasing the number of people with a CGT liability. Unused allowance cannot be carried forward to future years.
Capital Gains Tax rates in 2025/26 are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. These rates apply to most assets including shares and residential property (other than your main home). The rate you pay is determined by adding your capital gains on top of your taxable income for the year.
Shares, funds, and most other assets:
Residential property (not your main home):
Note: CGT rates on residential property were cut from 18%/28% to 18%/24% in the October 2024 Budget.
To determine which rate you pay, your capital gains are added on top of your taxable income. If your total income plus gains push you into the higher-rate band, the portion above the higher-rate threshold is taxed at the higher CGT rate.
A disposal for CGT purposes is any transaction that transfers ownership of an asset, not just a sale. You trigger a disposal when you sell an asset, give it away (other than to a spouse or civil partner), swap it for another asset, or receive compensation for an asset that was lost or destroyed. Transfers between spouses and civil partners are not treated as disposals under HMRC rules.
You do not normally pay CGT on the sale of your main home. This exemption is called Private Residence Relief (PRR). However, CGT may apply in certain circumstances, for example, if you have let part of the property, used it partly for business, or if the garden exceeds half a hectare. A property bought specifically to make a profit is also unlikely to qualify for full relief.
HMRC provides several statutory CGT exemptions. Assets held in an ISA are fully exempt from CGT. The annual exempt amount (£3,000 in 2025/26) shelters gains below that threshold. Capital losses in a tax year are deducted from gains, and unused losses can be carried forward. Transfers between spouses or civil partners do not trigger CGT.
The full rules on CGT exemptions and reliefs are published at gov.uk/capital-gains-tax.
For UK residential property sales, you must report and pay CGT within 60 days of completion using HMRC’s online Capital Gains Tax service, even if you do not normally complete a Self Assessment return. For other assets (shares, funds, etc.), CGT is reported via Self Assessment for the tax year in which the disposal occurred, with a deadline of 31 January following the tax year end.
To see how CGT actually works in practice, here’s a step-by-step example for a basic-rate taxpayer selling shares outside an ISA in the 2025/26 tax year.
Scenario: Priya is a basic-rate taxpayer. She sells shares she bought for £10,000 for £18,000.
If Priya had been a higher-rate taxpayer, the same gain would have been taxed at 24%, £1,200. If she had held the same shares inside a Stocks and Shares ISA, no CGT would be due at all.
Capital Gains Tax on shares is charged on the profit you make when you sell shares held outside an ISA or pension. The 2025/26 rates are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, after applying the £3,000 annual exempt amount. CGT applies to listed shares, AIM shares (with some Business Asset Disposal Relief exceptions), unit trusts, and investment funds held in a General Investment Account (GIA).
The simplest way to avoid CGT on share gains is to use your £20,000 annual ISA allowance, investments inside an ISA are fully sheltered from CGT.
Yes, HMRC treats cryptoassets such as Bitcoin and Ethereum as property for tax purposes, so disposing of them can trigger Capital Gains Tax. A disposal includes selling crypto for pounds, swapping one cryptocurrency for another, using crypto to pay for goods or services, or gifting it (other than to a spouse). The gain is the increase in pound value between the date you acquired the crypto and the date of disposal.
The same £3,000 annual exempt amount applies, and gains above it are taxed at 18% (basic rate) or 24% (higher and additional rate). HMRC’s pooling rules apply, so you cannot simply use the price of one specific coin, the cost basis is the pooled average. The full HMRC guidance is published in the Cryptoassets Manual on gov.uk.
There are several legal ways to reduce a CGT liability under HMRC rules. The most effective is sheltering investments in tax-advantaged wrappers, ISAs and pensions are exempt from CGT. Other options include using your annual exempt amount each year, offsetting losses against gains, and timing disposals across tax years.
The Capital Gains Tax annual exempt amount is £3,000 for 2025/26, the same as 2024/25. This means individuals can realise gains of up to £3,000 in a tax year without paying CGT. The allowance was reduced from £12,300 in 2022/23 in a series of cuts, significantly increasing the number of people who now have a CGT liability.
Usually not, if it is your main home. Private Residence Relief (PRR) exempts gains on the sale of your primary residence in most cases. CGT may apply if the property was rented out, used partly for business, or is a second home. Complex situations, such as properties held for mixed purposes, are worth discussing with a financial adviser or tax specialist.
For most assets, CGT is charged at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. Residential property (other than your main home) is also taxed at 18% or 24% depending on your income band. Different rates apply to carried interest and certain business disposals. The rates changed in October 2024.
No. Investments held inside a Stocks and Shares ISA are exempt from Capital Gains Tax, regardless of how large the gain is. The ISA wrapper also shelters investment income from income tax. Gains on shares held outside an ISA are potentially liable to CGT once they exceed the annual exempt amount.
For most assets, CGT is reported through a Self Assessment tax return by 31 January following the end of the tax year. For UK residential property, a separate 60-day reporting and payment window applies after completion of the sale. You can report and pay using HMRC's online Capital Gains Tax service.
Yes. HMRC treats cryptoassets like Bitcoin and Ethereum as property for tax purposes, so selling, swapping, spending, or gifting crypto can trigger CGT. The same £3,000 annual exempt amount applies, and gains are taxed at 18% (basic rate) or 24% (higher and additional rate) in 2025/26.
CGT on shares is sale price minus purchase cost (the gain), minus the £3,000 annual exempt amount, then taxed at 18% or 24% depending on your income band. For example, selling shares for £18,000 that you bought for £10,000 gives an £8,000 gain. After the £3,000 allowance, £5,000 is taxable, £900 CGT for a basic-rate payer.
CGT rates, allowances, and reliefs change at every Budget. FinanceSimply covers every announcement that affects your investments and property, in plain English.
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