TL;DR:
- The capital gains tax applies to profits from selling assets that have increased in value, with the annual exemption reduced to £3,000 for 2026/27. Most assets like shares, properties, and cryptocurrencies are taxable unless they are exempt, such as main homes and ISAs. Planning ahead and using tax wrappers can significantly reduce or eliminate CGT liabilities.
Capital gains tax (CGT) is a tax on the profit you make when you sell or dispose of an asset that has increased in value. You pay CGT on the gain, not the full sale price. For UK residents and investors, understanding how CGT works is no longer optional. The annual exempt amount has fallen to £3,000 for 2026/27, down from £12,300 in 2022/23. That single change has pushed thousands of ordinary investors into CGT liability for the first time, making this one of the most consequential tax shifts of the decade.
Capital gains tax is defined as a charge on the profit arising from the disposal of a chargeable asset. HMRC applies CGT to UK residents who sell shares, investment property, business assets, cryptocurrency, and certain valuable personal possessions. The tax applies to the gain only. If you bought shares for £10,000 and sold them for £16,000, CGT applies to the £6,000 profit, not the £16,000 proceeds.
CGT is separate from income tax, but the two interact directly. Your total taxable income determines which CGT rate applies to your gains. A basic-rate taxpayer and a higher-rate taxpayer selling identical assets in the same year will pay different amounts of CGT on the same profit.
Non-UK residents are generally outside the scope of CGT, with one major exception: disposals of UK residential property. HMRC charges CGT on those gains regardless of where the seller lives.
The following assets are subject to CGT when disposed of at a profit:
Several assets fall entirely outside CGT:
The personal possessions rule carries a nuance many investors miss. Chattels sold for £6,000 or less are fully exempt. Above that threshold, a marginal relief calculation applies, which can reduce the effective gain.
Pro Tip: If you own assets jointly with a spouse or civil partner, each of you holds a separate £3,000 annual exempt amount. Transferring assets between spouses before disposal is one of the simplest ways to reduce your tax bill on a gain.
The annual exempt amount is £3,000 per individual for 2026/27. Gains below this threshold are tax-free. Gains above it are taxed at the following rates:
| Asset type | Basic-rate taxpayer | Higher or additional-rate taxpayer |
|---|---|---|
| Most assets (shares, crypto, business assets) | 18% | 24% |
| Residential property (not main home) | 18% | 24% |
| Business Asset Disposal Relief (BADR) | 18% | 18% |
Rates for residential property and most other assets were equalised in the October 2024 Budget, removing the previous distinction between property and other gains.
CGT rates depend on your total taxable income plus gains in the tax year. Gains are treated as the top slice of income. If your salary fills the basic-rate band entirely, your gains are taxed at 24% from the first pound above the exempt amount. If you have unused basic-rate band remaining, that portion of your gain is taxed at 18%.
This stacking effect catches many investors off guard. A freelancer with variable income may pay 18% on gains in a low-income year and 24% in a high-income year, even if the asset and the gain are identical.
Business Asset Disposal Relief (BADR) carries a rate of 18% from 6 April 2026, with a lifetime limit of £1 million. To qualify, you must hold at least 5% of the company’s shares and have been an employee or director for at least two years before disposal. The BADR rate rose from 10% prior to 2025, so founders planning exits should factor this increase into their projections.
Pro Tip: Tax advisors recommend carefully stacking gains on income before completing a disposal. Knowing exactly how much basic-rate band you have left in a given tax year can save you thousands by timing a sale to fall in a lower-income year.
Reporting obligations differ by asset type. Getting this wrong leads to automatic penalties from HMRC.
For detailed guidance on filing obligations, the tax filing procedure for UK consultants covers the full Self Assessment process, including CGT disclosures.
The most effective CGT management is preventing its occurrence by using tax wrappers. A Stocks and Shares ISA shelters all gains and income from CGT and income tax permanently. A SIPP does the same for pension investments. The annual ISA allowance is £20,000 per person. Married couples can shelter £40,000 per year between them, which compounds significantly over a decade.
Allowable deductions such as buying and selling costs and improvement expenses reduce the taxable gain, but many investors fail to claim them. For property, this includes solicitor fees, stamp duty land tax paid on purchase, and the cost of structural improvements (not repairs). For shares, it includes broker commissions and stamp duty on acquisition. Failing to document these costs results in overpayment of CGT.
Capital losses must be deducted from gains before applying the annual exempt amount. The unused annual exempt amount cannot be carried forward. Excess losses, however, can be carried forward indefinitely. This creates a clear priority: crystallise losses in the same tax year as large gains, and carry forward any surplus losses to offset future gains. Waiting until after 5 April to realise a loss that could have offset a gain in the same year is a costly and irreversible mistake.
For investors using SEIS or EIS schemes, there are additional CGT deferral and disposal relief benefits. The SEIS and EIS investment guide covers these in detail.
Pro Tip: Early use of tax wrappers beats disposal timing as a CGT strategy. Once a gain is realised outside a wrapper, your options are limited to reliefs and deductions. Inside a wrapper, the gain never arises.
Capital gains tax in 2026 demands active management: the reduced £3,000 annual exempt amount means most investors with meaningful portfolios will owe CGT on disposals they would previously have made tax-free.
| Point | Details |
|---|---|
| CGT applies to gains, not proceeds | Tax is charged on the profit only, after deducting allowable costs. |
| Annual exempt amount is now £3,000 | This is down from £12,300 in 2022/23, significantly increasing liability for many investors. |
| Rates are 18% or 24% | The rate depends on whether your total income plus gains falls within the basic or higher-rate band. |
| Residential property has a 60-day deadline | Report and pay CGT on UK property disposals within 60 days of completion or face automatic penalties. |
| Tax wrappers eliminate CGT entirely | Stocks and Shares ISAs and SIPPs shelter gains permanently, making them the most effective planning tool. |
The reduction of the annual exempt amount from £12,300 to £3,000 is not a minor administrative change. On a £40,000 gain, the taxable amount rises to £37,000 in 2026 versus £27,700 in 2022/23. At 24%, that difference costs an additional £2,232 in tax on the same gain. Multiply that across a portfolio of disposals and the numbers become significant very quickly.
What I see repeatedly in practice is investors who treat CGT as something to deal with after the fact. They sell, then ask what the tax bill will be. By that point, the options are narrow. The annual exempt amount is gone if unused. Losses that could have been crystallised in the same year are still sitting in the portfolio. The basic-rate band may have been filled by income, pushing the entire gain to 24%.
The investors who pay the least CGT are the ones who plan before they sell. They know their income for the year. They know how much basic-rate band they have left. They have already moved long-term holdings into ISAs through bed-and-ISA transactions. They have documented every cost of acquisition and improvement.
The 60-day reporting rule for residential property is another area where I see genuine distress. Sellers assume their solicitor handles it. Most do not. The obligation sits with the taxpayer, and a £100 automatic fine is the least of the consequences for a missed deadline.
My strongest recommendation: treat CGT planning as part of the disposal decision, not an afterthought. If you are sitting on a significant unrealised gain, the time to plan is now, not in the weeks after you sell.
— Rahamut
CGT planning is one of the areas where professional advice pays for itself most clearly. A single missed deduction or a poorly timed disposal can cost more than a year’s worth of accountancy fees.
At Priceandaccountants, we work with UK investors, property owners, and business founders to calculate gains accurately, identify every available relief, and meet HMRC’s reporting deadlines without stress. Our tax advisory and planning service covers CGT calculations, Self Assessment filing, BADR eligibility reviews, and disposal timing strategies. Whether you are selling shares, a buy-to-let property, or a business interest, we give you a clear picture of your liability before you commit to a transaction. Contact us to speak with a specialist.
The standard CGT rates for 2026/27 are 18% for basic-rate taxpayers and 24% for higher or additional-rate taxpayers on most assets. Business Asset Disposal Relief applies a flat 18% rate up to a £1 million lifetime limit.
The annual exempt amount for 2026/27 is £3,000 per individual. Gains below this threshold are tax-free. Gains above £3,000 are subject to CGT at the applicable rate.
No. Your main residence is protected by Private Residence Relief, which exempts the gain from CGT entirely in most cases. Partial relief may apply if the property was not your main home for the entire period of ownership.
UK residents must report and pay CGT on disposals of UK residential property within 60 days of completion via HMRC’s online service. Missing this deadline results in an automatic £100 penalty, with further charges for continued non-compliance.
No. The annual exempt amount cannot be carried forward to future tax years. Capital losses, however, can be carried forward indefinitely after being applied against gains in the year they arise.
