How Capital Gains Tax works
A plain-English guide to CGT: what counts as a gain, the £3,000 allowance, the 18% and 24% rates, and how to report and pay.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit you make when you sell (or “dispose of”) something that has gone up in value. You are taxed on the gain — the difference between what you paid and what you sold it for — not on the total money you receive.
Common chargeable assets include shares and funds held outside an ISA, cryptocurrency, second homes and buy-to-let property, business assets and valuable possessions (worth over £6,000). A “disposal” isn't just a sale: swapping an asset, giving it away (except to your spouse or a charity), or receiving compensation for it all count.
The £3,000 annual exempt amount
Everyone gets a tax-free CGT allowance of £3,000 a year (2026/27). Only total gains above this are taxed. The allowance has fallen sharply in recent years — it was £12,300 in 2022/23 and £6,000 in 2023/24 — so many more people now pay CGT.
The 2026/27 rates: 18% and 24%
CGT rates depend on your income, because gains are stacked on top of your taxable income. The part of the gain that fits in your unused basic-rate band is taxed at 18%; anything above it at 24%.
| Where the gain falls | Rate |
|---|---|
| Within your unused basic-rate band (income + gain under £50,270) | 18% |
| Above the basic-rate band | 24% |
From 6 April 2026 the same two rates apply to all chargeable assets — shares, funds, crypto and residential property alike.
Worked example: £20,000 gain on shares
| Gain | £20,000 |
| Less annual exempt amount | − £3,000 |
| Taxable gain | £17,000 |
| Unused basic-rate band (£50,270 − £35,000) | £15,270 |
| 18% × £15,270 | £2,748.60 |
| 24% × £1,730 | £415.20 |
| Total CGT | £3,163.80 |
Working out the gain: costs you can deduct
Your gain is the sale price minus the base cost — what you originally paid — and allowable expenses:
- Buying and selling costs: estate agent, broker, auction and legal fees
- Stamp duty you paid when you bought the asset
- Capital improvements (an extension, a loft conversion) — but not maintenance or repairs
Capital losses
If you sell an asset for less than it cost, that capital loss reduces your gains in the same year, and any unused amount carries forward indefinitely. Report losses to HMRC (usually on your tax return) within four years — otherwise you lose the right to use them.
Reporting and paying
For UK residential property, you must report the gain and pay the CGT within 60 days of completion using HMRC's property reporting service — missing the deadline brings penalties and interest. Other gains go on your Self Assessment return by 31 January after the tax year (or HMRC's real-time CGT service if you don't normally file a return).
Frequently asked questions
What is the Capital Gains Tax allowance for 2026/27?
The annual exempt amount is £3,000. You only pay CGT on total gains above this in the tax year, after deducting any allowable losses. It cannot be carried forward — use it or lose it each year.
What are the CGT rates for 2026/27?
Gains are taxed at 18% to the extent they fit within your unused basic-rate band and 24% above it. Since 6 April 2026 the same two rates apply to shares, funds, crypto and residential property alike.
Do I pay CGT when I sell my home?
Usually not. Private Residence Relief normally covers your only or main home in full. CGT typically arises on second homes, buy-to-lets, or homes that were let out or partly used for business.
How do capital losses work?
Losses in the same tax year are set against gains automatically. Unused losses can be carried forward indefinitely and used against future gains — but you must report them to HMRC within four years of the end of the tax year in which they arose.
When do I report and pay CGT?
UK residential property gains must be reported and paid within 60 days of completion using HMRC’s online service. Other gains are reported through Self Assessment by 31 January after the tax year, or via HMRC’s real-time CGT service.
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