Last updated: July 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. For 2026/27 the first £3,000 of gains is tax-free, and gains above that are taxed at 18% or 24% depending on your income. 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 allowance, properly called the annual exempt amount, is £3,000 for 2026/27. It is unchanged from 2025/26. You only pay Capital Gains Tax on gains above that figure, and the allowance belongs to you as a person, not to each asset, so it covers all your gains for the year added together. Trusts get £1,500.
| Item | 2026/27 |
|---|---|
| Annual exempt amount, individuals | £3,000 |
| Annual exempt amount, trusts | £1,500 |
| CGT rate, basic-rate taxpayers | 18% |
| CGT rate, higher and additional-rate taxpayers | 24% |
The allowance has been cut hard over the last few years, which is why a lot more ordinary investors now have a CGT bill to think about:
The allowance resets on 6 April each year and unused allowance cannot be carried forward, so whatever is left of it at the end of a tax year is simply gone. The 2026/27 tax year runs from 6 April 2026 to 5 April 2027.
One thing that trips people up: the £3,000 is measured against your gain, not against the money that lands in your account. Selling shares for £18,000 that cost you £10,000 is an £8,000 gain, and it is the £8,000 that gets compared with the allowance, not the £18,000.
Capital Gains Tax rates for 2026/27 are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, both unchanged from 2025/26. 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.
That link to your income catches people out. A gain can be split across both rates: someone on a modest salary might pay 18% on the part of the gain that still fits inside the basic rate band and 24% on whatever spills over the higher-rate threshold. It is worth knowing where the income tax bands fall before working out a CGT bill, because your salary decides the CGT rate as much as the gain does.
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 2026/27 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 and there would be nothing to report to HMRC.
Capital Gains Tax on shares is charged on the profit you make when you sell shares held outside an ISA or pension. The 2026/27 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 pooling rule is the one that causes most of the confusion. If you have bought the same share repeatedly at different prices, you cannot pick which ones you sold. HMRC treats them as a single pool at average cost, so the gain is worked out against that average rather than against whichever purchase happens to suit you.
Gains on investments held inside an ISA sit outside CGT entirely, which is what the £20,000 annual ISA allowance is really buying you. Shares held inside an ISA are not liable to CGT at all, no matter how large the gain, and they do not need to be declared on a tax return.
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.
Second homes and buy-to-lets are a different story: they get no Private Residence Relief, so the whole gain is in scope. CGT is also only one of the property taxes involved, because stamp duty on an additional property is charged at a surcharge on top of the standard rates when you buy it in the first place.
HMRC provides several statutory CGT exemptions. Assets held in an ISA are fully exempt from CGT. The annual exempt amount (£3,000 in 2026/27) 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.
Records matter here more than the paperwork itself. Because the gain is sale price minus what you originally paid, you need the purchase cost, the sale price and the dates, plus any buying and selling costs, and those can go back years. Most platforms produce an annual tax statement, but the responsibility to keep the figures sits with you.
If all your investments sit inside an ISA there is nothing to report at all. ISA gains never go on a tax return, whatever the numbers look like, which is a large part of what the ISA wrapper is for.
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.
HMRC rules leave several legitimate routes to a smaller CGT bill. Investments held in ISAs and pensions are outside CGT altogether. Beyond that, the annual exempt amount refreshes every tax year, losses can be set against gains, and the timing of a disposal decides which tax year it lands in.
The Capital Gains Tax annual exempt amount is £3,000 for 2026/27, the same as 2025/26. This means individuals can realise gains of up to £3,000 in a tax year without paying CGT. Trusts get £1,500. 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.
No. The annual exempt amount stayed at £3,000 for individuals and £1,500 for trusts in 2026/27, and the CGT rates stayed at 18% and 24%. The allowance resets on 6 April each year and cannot be carried forward, so any part of it left unused at the end of a tax year is lost.
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, unchanged from 2025/26. 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 2026/27.
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.
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