Capital Gains Tax
A tax on the profit (gain) you make when you sell or dispose of an asset that has increased in value, such as shares, investment property, or business assets. The gain is calculated as the sale proceeds minus the original cost and allowable expenses. Rates vary depending on your income and the type of asset — residential property attracts higher rates than other assets.
Related Terms
Annual Exempt Amount
The amount of capital gains you can make in a tax year before Capital Gains Tax becomes due, currently £3,000 for individuals.
Business Asset Disposal Relief (BADR)
A relief that reduces the Capital Gains Tax rate to 10% on qualifying gains from the disposal of business assets, formerly known as Entrepreneurs' Relief.
Investors' Relief
A Capital Gains Tax relief that reduces the CGT rate to 10% on gains from disposing of shares in unlisted trading companies, aimed at encouraging external investors in small businesses.
Residential Property CGT
Capital Gains Tax on gains from selling UK residential property that is not your main home, charged at 18% for basic-rate taxpayers and 24% for higher- and additional-rate taxpayers.
Effective Rate
The average rate of tax you pay across all your income, calculated by dividing your total tax bill by your gross income.
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