Capital Gains Tax

Get Capital Gains Tax Advice 2026
(tax year 06/04/2026 to 05/04/2027)

Capital Gains Tax (CGT) Overview

Capital Gains Tax is charged on the profit (gain) you make when you sell or give away certain capital assets.
The taxable gain is calculated as:

Sale price or market value at the date of disposal
minus
Purchase price and allowable costs
minus
Your annual CGT allowance

The result is your chargeable gain.

Significant changes have taken place over time, including the removal of taper relief in 2008 and reductions in effective tax rates for non‑property investments in 2017.

1.  Capital Gains Allowances and Rates (2025)

Annual Exemption: Individuals

• £3,000.00 per person
• Each individual, spouse, and civil partner has their own allowance
• Gains up to this amount can be realised tax‑free each year

CGT Rates: Individuals (General Assets)

Chargeable gains are added to taxable income.

• 18.00% if total income + gains stay within the basic rate band
• 24.00% on gains falling into the higher‑rate band
• If the gain straddles the threshold, part is taxed at 18.00% and part at 24.00%

CGT Rates: Individuals (Investment/Residential Property)

• 18.00% basic rate
• 24.00% higher rate

Annual Exemption: Trusts

• £1,500 per tax year
• Usually shared across all trusts created by the same settlor
• Trust gains are taxed at 24.00%

Annual Exemption: Legal Personal Representatives (LPRs)

• £3,000.00 per tax year

Annual Exemption: Businesses

• No annual exemption
• All gains treated as trading receipts and taxed at standard business or corporation tax rates

Entrepreneurs’ Relief / Business Asset Disposal Relief (BADR)

CGT rate of 14.00% applies to qualifying business disposals, subject to lifetime limits:

• 06/04/2008 – 05/04/2010: up to £1m
• 06/04/2010 – 22/06/2010: up to £2m
• 23/06/2010 – 05/04/2011: up to £5m
• 06/04/2011 – 05/04/2020: up to £10m
• 06/04/2020 onwards: up to £1m

Withdrawal of Tiered Rates and Taper Relief (Pre‑2008)

Before 5 April 2008:

• CGT matched income tax bands:
  • Lower rate: 10%
  • Basic rate: 20%
  • Higher rate: 40%
• Taper relief applied to reduce gains based on holding period
• Trusts could be taxed up to 40% depending on income/gain type

These rules no longer apply but remain relevant for historic disposals.

2.  Paying Capital Gains Tax

Non‑Residential Property Gains

• Reported via Self Assessment
• Must be reported by 31 December following the tax year of disposal
• Tax payable by 31 January after the tax year

Example:
Gain made in 2025/26 → report by 31/12/2026 → pay by 31/01/2027.

Residential Property Gains

• Reported via a UK Property Account CGT Return
• Tax must be paid within 60 days of disposal

3.  How Capital Gains Tax Is Calculated

Current Rules (Post‑6 April 2008)

Steps to calculate the gain:

• Determine sale price or market value
• Deduct purchase costs (legal fees, adviser fees, stamp duty, broker fees)
• Deduct enhancement/improvement costs (not maintenance)
• Deduct selling costs (auction fees, agent fees)
• Deduct allowable capital losses
• Deduct your annual exemption
• The result is your chargeable gain
• Apply the relevant CGT rate: 18.00% or 24.00% (or BADR at 14.00%)

Old Rules (Pre‑6 April 2008)

For historic disposals:

• Determine sale price or market value
• Deduct purchase costs
• Deduct enhancement/improvement costs
• Deduct selling costs
• Deduct indexation allowance (for assets acquired before April 1998)
• Deduct allowable capital losses
• Apply taper relief
• Deduct annual exemption
• Add gain to income
• Tax at 10%, 20%, or 40% depending on income band

Key Points at a Glance

• CGT applies to profits when disposing of assets
• Annual exemption: £3,000.00 for individuals, £1,500 for trusts
• Rates: 18.00% basic rate, 24.00% higher rate
• BADR offers 14.00% on qualifying business disposals
• Trusts taxed at 24.00%
• Residential property gains must be reported within 60 days
• Historic rules (taper relief, indexation) still matter for older assets

Frequently Asked Questions

What is Capital Gains Tax?

A tax on the profit you make when you sell, gift, or dispose of an asset.

How do I calculate my taxable gain?

Sale price or market value minus purchase costs, improvement costs, selling costs, losses, and your annual exemption.

What is the current CGT allowance?

Individuals: £3,000.00
Trusts: £1,500
LPRs: £3,000.00

What CGT rate will I pay?

18.00% if your income + gains stay within the basic rate band; 24.00% if they exceed it.

Are property gains taxed differently?

Yes.  Residential property gains must be reported within 60 days and are taxed at 18.00% or 24.00%.

Do businesses get an annual CGT exemption?

No.  All gains are treated as trading receipts.

What is Entrepreneurs’ Relief / BADR?

A 14.00% CGT rate on qualifying business disposals, subject to lifetime limits.

Do old rules still matter?

Yes.  Indexation allowance and taper relief apply to gains on assets acquired before their withdrawal dates.

Related:  CGT Taxable List  CGT Reliefs

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