What Is Capital Gains Tax?

Key facts

CGT is charged on the gain (profit), not the full sale price.
You only pay CGT when you dispose of an asset — not while you hold it.
Each individual gets an Annual Exempt Amount of £3,000 (2025/26) before any CGT is due.
CGT rates are 18% (basic rate) and 24% (higher rate) from 30 October 2024 for most assets.
Your main home is usually exempt from CGT thanks to Private Residence Relief.

How Capital Gains Tax Works When You Sell Assets

Capital Gains Tax (CGT) is a UK tax charged on the profit (or “gain”) you make when you dispose of an asset that has increased in value. It is charged on the gain — not the total sale price — and only becomes payable when you actually dispose of the asset.^[1]

CGT applies to individuals, trustees, and personal representatives of deceased persons. Companies do not pay CGT as such — they pay Corporation Tax on their “chargeable gains” instead, with slightly different rules.^[3]

Key distinction: CGT is a tax on capital profits — one-off gains from selling assets. It is separate from Income Tax, which covers revenue income like wages, trading profits, and rent. The two taxes have different rates, allowances, and reporting requirements.

What Assets Are Subject to CGT?

CGT can apply to most assets, including:^[2]

Residential property (other than your main home)
Buy-to-let and holiday properties
Shares and securities
Business assets including goodwill
Cryptocurrency and digital assets
Valuable personal possessions worth over £6,000 (jewellery, art, antiques)
Land and interests in land
Foreign currency (other than for personal spending)

Assets Exempt from CGT

Certain assets are specifically exempt from CGT:^[1]

Your main home (through Private Residence Relief)
Assets held in an ISA or pension
UK Government gilts and qualifying corporate bonds
Personal possessions (“chattels”) worth £6,000 or less
Your car (private motor vehicles are always exempt)
Betting, lottery, and pools winnings
Compensation for personal injury or wrong

Tip: Even exempt gains should be tracked, because losses on exempt assets are also exempt — meaning you cannot use them to reduce other gains.

How CGT Works: A Simple Example

The basic CGT calculation is straightforward:

Step	Description	Amount
1	Sale proceeds	£150,000
2	Less: allowable costs (purchase price + fees)	−£100,000
3	Gain before exemptions	£50,000
4	Less: Annual Exempt Amount (2025/26)	−£3,000
5	Taxable gain	£47,000
6	CGT at 24% (higher-rate taxpayer)	£11,280

The rate you pay depends on your total taxable income and what type of asset you disposed of. From 30 October 2024, the rates are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers on most assets.^[1]

What Counts as a Disposal?

A “disposal” for CGT purposes occurs when you:^[2]

Sell an asset
Give away an asset (the market value is used instead of sale proceeds)
Exchange or swap one asset for another
Receive compensation (e.g. an insurance payout for a destroyed or damaged asset)
An asset is lost or destroyed

You do not make a disposal simply by continuing to hold an asset, even if its value changes significantly. CGT is only triggered by an actual disposal event.

The Annual Exempt Amount

Every individual has an Annual Exempt Amount (AEA) — a tax-free allowance for capital gains. For 2025/26, the AEA is £3,000. Gains up to this amount in any tax year are tax-free.^[1]

Key points about the AEA:

It cannot be carried forward — use it or lose it each tax year
Each individual has their own AEA — married couples and civil partners have £3,000 each
Most trusts receive half the individual amount (£1,500 for 2025/26)
It was reduced from £6,000 (2023/24) to £3,000 from April 2024

CGT Rates at a Glance (2025/26)

Taxpayer Band	Standard Rate (from 30 Oct 2024)	Business Asset Disposal Relief
Basic rate (income up to £37,700)	18%	10%
Higher rate (income above £37,700)	24%	10%
Additional rate (income above £125,140)	24%	10%
Trustees and personal representatives	24%	10%

Prior to 30 October 2024, basic-rate gains on non-property assets were taxed at 10%, and higher-rate gains at 20%. The Autumn Budget 2024 aligned all asset types at 18%/24%.^[1]

Reporting and Paying CGT

How you report CGT depends on the type of asset disposed of:^[4]

Asset Type	How to Report	Payment Deadline
UK residential property	60-day CGT property return via HMRC online	Within 60 days of completion
All other assets	Self Assessment tax return (SA108)	31 January after end of tax year

If your only capital gains in the tax year are covered by the Annual Exempt Amount (total gains £3,000 or less for 2025/26), you may not need to report them at all — unless you have also made disposals with total proceeds exceeding four times the AEA (£12,000).

Tip: If you dispose of UK residential property at a gain, you must report and pay within 60 days of completion — do not wait until your Self Assessment return. Late reporting attracts penalties.

Frequently Asked Questions

What is Capital Gains Tax in simple terms?

Capital Gains Tax is a tax on the profit you make when you sell, give away, or otherwise dispose of an asset — such as a second property, shares, or a business. You pay tax on the gain (the increase in value), not on the total amount you receive.

When do I have to pay Capital Gains Tax?

You pay CGT when you dispose of an asset in a tax year and your total gains exceed the Annual Exempt Amount (£3,000 for 2025/26). For UK residential property, you must report and pay within 60 days of completion. For other assets, you report on your Self Assessment tax return.

Do I pay CGT on my main home?

Usually no. Private Residence Relief (PRR) exempts the gain on your main home from CGT, provided it has been your only or main residence throughout ownership. Partial relief may apply if you let part of it or were absent for certain periods.

Is CGT the same as Income Tax?

No. CGT applies to one-off profits from selling assets, while Income Tax applies to regular income such as wages, self-employment profits, and rental income. CGT rates are generally lower than Income Tax rates, and the two have separate thresholds and allowances.

Sources

Capital Gains Tax: what you pay it on, rates and allowances — GOV.UK
Capital Gains Tax: what you pay it on — GOV.UK
Capital Gains Manual: CG10200 – Introduction — HMRC
Tax when you sell property — GOV.UK