What is capital gains tax?
Capital gains tax (CGT) is paid on the profit when you sell or dispose of an asset that has increased in value — things like second homes, shares held outside ISAs, cryptocurrency, personal possessions worth over £6,000, and business assets. You're taxed on the gain (the increase in value), not the whole proceeds.
CGT rates for 2025/26
From 30 October 2024, the government aligned CGT rates for residential and non-residential assets. For 2025/26:
| Income band | Rate | Applies to |
|---|---|---|
| Basic rate band | 18% | All standard assets (shares, property, crypto, etc.) |
| Higher rate band | 24% | All standard assets above the basic-rate threshold |
| BADR (qualifying) | 14% | Business disposals up to £1m lifetime (was 10% pre-April 2025, rises to 18% from April 2026) |
The Annual Exempt Amount
Everyone has a £3,000 Annual Exempt Amount (AEA) for 2025/26 — the first £3,000 of gains in the tax year is tax-free. This has been slashed from £12,300 in 2022/23 to £6,000 in 2023/24 to £3,000 from 2024/25. Couples each have their own AEA, so joint disposals shelter £6,000 per year.
How CGT bands stack with income
CGT is layered on top of your other taxable income. The gain sits above salary, dividends and rental profits when HMRC decides which band applies. For someone with £35,000 of salary and a £50,000 gain:
- Taxable income after PA: £35,000 − £12,570 = £22,430. That uses £22,430 of the basic-rate band.
- Basic-rate band remaining for the gain: £37,700 − £22,430 = £15,270.
- Gain of £50,000 minus AEA £3,000 = £47,000 taxable.
- £15,270 at 18% = £2,749. £31,730 at 24% = £7,615. Total CGT: £10,364.
The effective CGT rate on a £50,000 standard gain with £35,000 of other income in 2025/26 works out at 20.7% — lower than income tax on the same amount, but only because part of the gain sits in the basic-rate band. Higher earners pay close to the full 24%.— GoForma technical team, 2025/26 tax year modelling
Business Asset Disposal Relief
BADR (formerly Entrepreneurs' Relief) reduces CGT to 14% in 2025/26 on qualifying business disposals, up to a £1 million lifetime limit per individual. The rate rises to 18% from 6 April 2026. To qualify you must have owned the business for at least two years and, for share disposals, held at least 5% of the ordinary share capital and voting rights while working as an officer or employee.
Reporting and payment
How you report depends on the asset type:
- UK residential property — 60-day deadline after completion. File a UK Property Disposal return and pay the tax within that window. Late filing is a £100 penalty, rising with time.
- Other assets — report on your Self Assessment tax return for the year. Tax is due by 31 January following the end of the tax year.
- Real-time service — for one-off gains below the Self Assessment threshold, you can use HMRC's Real Time Capital Gains Tax Service to declare and pay immediately.
What's exempt from CGT
- Your main home — Private Residence Relief generally wipes out the gain, subject to some time-apportionment if you've let it out or been absent for extended periods.
- ISAs and pensions — no CGT on investments held within ISAs or registered pension schemes.
- Gifts between spouses — transfers to a spouse or civil partner are at no-gain, no-loss; CGT is deferred to the receiving spouse's ultimate disposal.
- Personal possessions under £6,000 — jewellery, art, antiques below this limit are exempt; above it, partial relief (the "wasting chattels" rules).
- UK government gilts and qualifying corporate bonds — exempt from CGT entirely.