Tax Guide 2025/26
Capital Gains Tax (CGT) is charged when you sell or dispose of an asset that has increased in value. With reduced allowances and increased rates introduced in recent Budgets, understanding CGT has never been more important for UK investors, property owners and business owners.
What is Capital Gains Tax?
Capital Gains Tax is a tax on the profit you make when you sell or dispose of an asset — not on the total sale price. If you buy shares for £10,000 and sell them for £16,000, CGT is only calculated on the £6,000 profit (your “gain”).
CGT applies when you “dispose” of an asset, which includes selling it, gifting it, transferring it, swapping it for another asset, or receiving compensation (such as an insurance payout) for it.
What assets are subject to CGT?
- Investment properties (not your main home)
- Shares and investment funds (held outside an ISA)
- Business assets when you sell or close your business
- Cryptocurrency and digital assets
- Personal possessions worth over £6,000 (excluding your car)
- Land (that is not your primary residence)
Your main home is exempt!
When you sell your primary residence where you have lived throughout your ownership, you are generally fully exempt from Capital Gains Tax under Private Residence Relief (PRR). This is one of the most valuable tax reliefs available to UK homeowners.
CGT Rates for 2025/26
Following the October 2024 Autumn Budget, Chancellor Rachel Reeves increased CGT rates. The rates now in force for the 2025/26 tax year (from 6 April 2025) are:
| Asset Type | Basic Rate Taxpayer | Higher / Additional Rate Taxpayer |
|---|---|---|
| Most assets (shares, crypto, business assets) | 18% | 24% |
| Residential property | 18% | 24% |
| Business Asset Disposal Relief (BADR) | 14% (rising to 18% from April 2026) | |
| Carried interest (investment managers) | 32% | |
Important Rate Change Reminder
Prior to 30 October 2024, the lower rate was 10% and higher rate was 20% for most assets. These rates have now increased significantly. If you are planning asset disposals, please factor in the current rates.
How does my income affect my CGT rate?
Your CGT rate depends on whether adding your gain to your income pushes you into the higher-rate tax band (currently £50,270 for 2025/26). If your total income plus the gain stays below £50,270, you pay the basic rate. If it exceeds £50,270, the excess is taxed at the higher rate.
The CGT Annual Exempt Amount (Allowance)
Every individual gets a tax-free CGT allowance each year — any gains below this amount are not subject to tax. However, this allowance has been dramatically reduced in recent years:
| Tax Year | Individual Allowance | Trust Allowance |
|---|---|---|
| 2022/23 | £12,300 | £6,150 |
| 2023/24 | £6,000 | £3,000 |
| 2024/25 | £3,000 | £1,500 |
| 2025/26 (Current) | £3,000 | £1,500 |
Married couples can combine allowances
Spouses and civil partners can each use their own £3,000 allowance, giving a combined tax-free amount of £6,000. Transferring assets between spouses before disposal can be a powerful strategy — as transfers between them carry no CGT liability.
Worked Example
Let’s say you are a higher-rate taxpayer and you sell a buy-to-let property in 2025/26 for £280,000 that you originally bought for £200,000. Here’s how your CGT is calculated:
🔢 CGT Calculation — Property Sale 2025/26
Sale price£280,000
Less: purchase price– £200,000
Less: allowable costs (legal fees, stamp duty, improvements)– £8,000
Total gain£72,000
Less: annual exempt amount (2025/26)– £3,000
Taxable gain£69,000
CGT payable at 24% (higher rate)£16,560
You must report and pay CGT on UK residential property within 60 days of completion using HMRC’s online reporting service. Missing this deadline can result in penalties and interest charges.
How to Legally Reduce Your CGT Bill
There are several entirely legal strategies to reduce your Capital Gains Tax liability. Planning ahead is key — many of these need to be implemented before you dispose of the asset.
📊 Use Your ISA Allowance
Investments held in a Stocks & Shares ISA are completely exempt from CGT. You can invest up to £20,000 per year. Moving investments into ISAs shields future gains from tax.
👫 Transfer Assets to Your Spouse
Transfers between spouses carry no CGT. Your spouse can then sell the asset using their own £3,000 allowance and potentially their lower tax rate.
📅 Split Disposals Across Tax Years
Sell part of an asset before 5 April and the remainder after 6 April to use two years’ allowances — potentially saving up to £1,440 per person.
📉 Offset Capital Losses
If you have investments sitting at a loss, selling them in the same year as a gain can offset your liability. Losses can also be carried forward to future years.
🏢 Business Asset Disposal Relief
If you’re selling all or part of your business, BADR reduces the rate to 14% (up to a £1 million lifetime limit). Act before April 2026 when it rises to 18%.
🎓 Contribute to a Pension
Increasing pension contributions reduces your taxable income, which may keep gains within the basic-rate band (18% vs 24%) — a meaningful saving on large disposals.
When and How to Report CGT to HMRC
The reporting requirements differ depending on the type of asset disposed of:
UK Residential Property
You must report and pay any CGT owed within 60 days of completion of the sale, using HMRC’s online UK Property Reporting Service. This is in addition to any Self Assessment tax return you may need to file.
Other Assets (Shares, Business Assets etc.)
Report gains through your Self Assessment tax return by 31 January following the end of the tax year. For example, gains made between 6 April 2025 and 5 April 2026 must be reported by 31 January 2027.
Even if your gain is below the allowance, you may still need to report
If the total proceeds from selling assets exceed four times the annual exempt amount (£12,000 in 2025/26), you may need to report to HMRC even if no tax is due. Always keep accurate records of all asset disposals.
Special CGT Situations
Selling a Second Home or Buy-to-Let
Residential property that is not your main home is subject to CGT at 18% (basic rate) or 24% (higher rate) on gains. You must report within 60 days of completion. You can deduct the original purchase price, stamp duty, legal fees, estate agent fees, and the cost of improvements (but not maintenance or redecoration).
Gifting Assets
If you gift an asset to someone other than your spouse, CGT is calculated based on the market value at the time of the gift — even if you receive no money. This is particularly important when gifting property or shares to children.
Cryptocurrency
HMRC treats cryptocurrency as an asset subject to CGT. Every disposal — whether selling for cash, swapping for another cryptocurrency, or using crypto to buy goods — is a taxable event. Good record-keeping is essential.
Inheriting Assets
When you inherit an asset, you do not pay CGT at that point. However, when you later sell the inherited asset, CGT is calculated on the gain from the probate value (the value at the date of death) — not the original purchase price.
Frequently Asked Questions
Do I pay CGT on my main home?
Generally no — your main home is protected by Private Residence Relief. However, if you have rented out part of your home, used it exclusively for business, or it covers more than 5,000 square metres of grounds, part of the gain may become taxable.
What is the CGT reporting deadline for property?
You must report and pay CGT on UK residential property within 60 days of completion. Failure to do so will result in automatic penalties and interest on the unpaid tax.
Can I use my spouse’s CGT allowance?
Yes. You can transfer assets to your spouse with no CGT liability, and they can then use their own £3,000 annual exempt amount and potentially their lower tax rate when they sell.
What is Business Asset Disposal Relief?
BADR (formerly Entrepreneurs’ Relief) reduces CGT to 14% on qualifying business disposals up to a lifetime limit of £1 million. The rate will increase to 18% from 6 April 2026, so early planning is important for business owners considering a sale.