How Capital Gains Tax Works in 2025/26
Capital gains tax (CGT) is charged on the profit you make when you sell or dispose of an asset that has increased in value. You don't pay CGT on the full sale price — only on the gain (the increase in value). Every individual has an annual exempt amount of £3,000 in 2025/26. Gains up to this amount are tax-free; only gains above it are subject to CGT.
The rates: 18% and 24%
From 30 October 2024 (the Autumn Budget), CGT rates were simplified. Both residential property and other assets (shares, investments) now use the same two rates:
- —18% — on gains that fall within your remaining basic rate band (income up to £50,270)
- —24% — on gains above the basic rate threshold (income over £50,270)
Your income and your taxable gain are stacked together. If your income already uses most of your basic rate band, your gain will mostly fall at 24%. If you have lots of basic rate band remaining, more of your gain will be taxed at 18%.
Your main home is exempt
Private Residence Relief means you pay no CGT when you sell your main home. CGT only applies to second properties, buy-to-let properties, inherited property that isn't your main home, shares, business assets, and other investments held outside an ISA or pension.
ISAs and pensions: always CGT-free
Gains made inside a Stocks & Shares ISA or pension are completely free of CGT. This is one of the strongest arguments for using your ISA allowance — not just for income tax savings, but to shelter future gains from CGT entirely.
Frequently Asked Questions
What is the CGT annual exempt amount for 2025/26?
The annual exempt amount is £3,000 for 2025/26. This is the total gain you can realise in one tax year before CGT becomes payable. It cannot be carried forward — if unused, it is lost. It has been reduced sharply from £12,300 in 2022/23 to £6,000 in 2023/24 and then to £3,000 from 2024/25 onwards.
Do I pay CGT when I sell my main home?
No. Your main residence is exempt from CGT under Private Residence Relief (PRR). CGT only applies to residential property that is not your main home — such as a buy-to-let, a second home, or inherited property you don't live in. If you have lived in the property for only part of the ownership period, partial relief may apply.
How do I know whether I pay 18% or 24%?
Add your taxable income (after the £12,570 personal allowance) to your taxable gain. The portion that falls below £50,270 in total is taxed at 18%. Anything above is taxed at 24%. For example, if your income is £40,000, you have £10,270 of basic rate band remaining. The first £10,270 of taxable gain would be at 18%, and the rest at 24%.
What costs can I deduct from my capital gain?
You can deduct the original purchase price plus allowable costs: purchase fees (solicitor, surveyor), improvement costs (not maintenance or repairs), and selling costs (estate agent fees, solicitor fees). You cannot deduct mortgage interest, insurance, or general maintenance. For shares, you can deduct dealing commissions and stamp duty paid on purchase.
When do I have to report and pay CGT?
For UK residential property: you must report and pay within 60 days of completion using HMRC's online property disposal service. For other assets: report on your Self Assessment return and pay by 31 January following the tax year end. If you do not already complete a Self Assessment return, you must register with HMRC if you have a reportable gain.
Can I transfer assets to my spouse to reduce CGT?
Yes. Transfers between spouses and civil partners are free of CGT (they are treated as made at no gain/no loss). By transferring part of an asset to your spouse before selling it, you can each use your own £3,000 annual exempt amount and potentially each pay at a lower rate if one spouse is a basic rate taxpayer. This is a legitimate and widely used tax planning strategy.