Capital Gains Tax basics

What's taxed, what isn't, the rates, and the reliefs most people never use.

Capital gains tax is charged on the profit when you dispose of an asset, not on the amount you receive. Sell something for £50,000 that cost you £30,000 and the gain is £20,000. That's what's taxed.

For most people it's an occasional tax, triggered by selling a second property, cashing in investments held outside an ISA, or disposing of a business. Which is precisely why it catches people out — it's not a tax you deal with regularly enough to build habits around.

What's in scope

Taxed: shares and funds held outside ISAs and pensions, second homes and buy-to-let property, business assets, land, valuable personal possessions above a threshold, and cryptoassets.

Not taxed: your main home in most circumstances, anything inside an ISA or pension, cars, UK government gilts, personal possessions below the threshold, lottery and betting winnings, and gifts to a spouse or civil partner.

"Disposal" is broader than selling. Giving something away, swapping it, or transferring it to someone other than your spouse all count as disposals at market value. People are routinely caught by gifting an asset to an adult child, which triggers a gain even though no money changed hands.

The numbers for 2026/27

Annual exempt amount: £3,000. The first £3,000 of gains each tax year is tax-free.

Rates: 18% for gains falling within your basic rate band, 24% above it.

The rate depends on your income as well as your gain. Add the gain to your income to work out how much falls in each band — a large gain can straddle both rates.

The annual exempt amount has been cut sharply in recent years, from £12,300 as recently as 2022/23. That's brought a lot of people into the tax who were previously nowhere near it.

Reporting deadlines

For most assets, gains go on your Self Assessment return by the following 31 January.

UK residential property is different. A gain on a UK residential property disposal must be reported and the tax paid within 60 days of completion. Miss it and penalties start accruing quickly. This is the single most commonly missed deadline in the whole system — see Capital gains tax on property.

The reliefs and habits worth knowing

Use the annual exemption every year. It doesn't carry forward. Someone with a large unrealised gain who sells nothing for a decade wastes ten years of exemption. Realising gains gradually — selling enough each year to use the exemption and immediately reinvesting — costs nothing and reduces the eventual bill considerably.

You can't sell and rebuy the same holding within 30 days and have it count as a disposal for this purpose. The workaround is to rebuy a similar but not identical fund, or to rebuy inside an ISA, which brings us to:

Bed and ISA. Sell an investment held outside a wrapper, use the exemption to cover the gain, and immediately rebuy it inside an ISA. From then on it's sheltered permanently. This is one of the most useful routine moves available and it's often done as part of year-end planning.

Transfer to a spouse before selling. Transfers between spouses and civil partners happen at no gain, no loss. Moving half an asset to a spouse before disposal means two annual exemptions instead of one, and potentially some of the gain taxed at their lower rate. This has to be a genuine transfer.

Offset losses. Losses on other assets reduce your gains. Losses can be carried forward indefinitely, but only if you've reported them — usually within four years. A lot of people have unreported losses that could have sheltered later gains.

Business Asset Disposal Relief may reduce the rate on qualifying business disposals, subject to a lifetime limit and detailed conditions. If you're selling a business, this is specialist territory and the rules have been changing.

When to get help

Straightforward share sales within the exemption need no help at all. Property disposals, business sales, anything involving trusts, and anything where the gain is large enough that the difference between doing it well and doing it badly runs into thousands — those are worth advice.

The Capital Gains Tax Calculator will handle the arithmetic on a simple disposal.

This article is for general education only and isn't personal advice. Figures are for 2026/27.