Capital Gains Tax (CGT) is charged on the profit — the gain — you make when you sell or otherwise dispose of a capital asset. You do not pay CGT on the full sale proceeds; only on the profit above what you paid (the cost basis).
What Triggers CGT?
A disposal that may trigger CGT includes:
- Selling shares, funds, or other investments held outside an ISA or pension
- Selling a second property or buy-to-let
- Giving away an asset (transfers between spouses/civil partners are generally exempt)
- Receiving compensation for an asset
CGT does not apply to:
- Assets held inside a stocks-and-shares ISA or pension
- Your main home (subject to Private Residence Relief)
- UK government bonds (gilts)
- Personal belongings (chattels) sold or given away for £6,000 or less
CGT Rates 2025/26 and 2026/27
| Asset Type | Basic Rate Taxpayer | Higher/Additional Rate Taxpayer |
|---|---|---|
| Residential property | 18% | 24% |
| Other assets (shares, etc.) | 18% | 24% |
Following the October 2024 Budget, the rates for shares and other assets were aligned with the property rates. Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) applies a reduced 18% rate from 6 April 2026 (it was 14% in 2025/26) on the first £1 million of qualifying business gains.
The Annual Exempt Amount
Every individual has an Annual Exempt Amount — gains up to and including this amount are tax-free. For 2025/26 and 2026/27, this is £3,000. The allowance has fallen sharply from £12,300 in 2022/23, making tax planning more important for investors with gains above this level.
Which Rate Applies to You?
CGT rates depend on your total income in the tax year. Your gains are “stacked” on top of your income:
- If gains keep you within the Basic Rate band: you pay 18%
- If gains push you above the Basic Rate threshold: the excess is taxed at 24%
Example: You have £45,000 of employment income and make a £20,000 share gain. The Basic Rate band runs to £50,270, so:
- £5,270 of the gain is taxed at 18% = £948.60
- £11,730 (after the £3,000 exemption) is taxed at 24% = £2,815.20
- Total CGT: ~£3,764
Key Reliefs
Private Residence Relief: Exempts gains on your main home for the period it was your only or main residence.
Business Asset Disposal Relief: 18% rate from 6 April 2026 (14% in 2025/26), on qualifying disposals of a business, shares in a personal company, or partnership interests (lifetime limit of £1 million). Budget 2026 announced that the lifetime limit halves from £1 million to £500,000 for disposals from 6 April 2027 (the 18% rate is unchanged), and a new Founders’ Relief charging 10% on up to £10 million of lifetime gains for qualifying founders from the same date; both still need Finance Bill 2026-27.
Gift Hold-Over Relief: Defers CGT on gifts of business assets or shares in unquoted trading companies.
ISA Sheltering: Gains within a stocks-and-shares ISA are completely CGT-free. Moving investments into an ISA (by selling and rebuying) can shelter future growth.
Key Takeaway
With the Annual Exempt Amount now just £3,000, many investors encounter CGT who previously did not. Consider your timing — spreading disposals across tax years can make effective use of multiple exemptions. Use our capital gains tax calculator to estimate your liability.