How UK Capital Gains Tax Works
Capital gains tax charges the profit you make when you sell or otherwise dispose of an asset that has grown in value. For the 2026/27 tax year the rates are 18% and 24%, with the split driven by your income tax band rather than the type of asset. Every individual also gets an annual exempt amount of £3,000, and total gains below that threshold stay untaxed and usually need no reporting at all.
The calculation itself runs in a fixed order: work out proceeds, deduct allowable costs, subtract losses, then remove the exempt amount, and only then apply the rates. Doing this by hand invites mistakes, especially when one gain straddles both the 18% and 24% rates. Run the numbers here first, then fold the result into the wider picture with a net worth calculator to see how the tax hit moves your overall position.
Scotland and Wales set their own income tax rates, but capital gains tax itself is reserved to Westminster and the 18% and 24% rates apply UK-wide. The computation for a basic rate taxpayer in Glasgow matches one in Cardiff or Belfast, because the band the gains fill is the UK basic rate band of £37,700. Only the income side differs, since Scottish bands can change how much of that £37,700 you have already used up.
What Counts as a Chargeable Disposal
A disposal happens when you sell, gift, swap or receive compensation for an asset. Chargeable assets include shares and funds held outside ISAs and pensions, second homes and buy-to-let property, cryptocurrency, business assets, and personal possessions worth more than £6,000 such as jewellery, antiques or fine wine. The tax falls on the gain, so an asset that lost value creates a loss you can use against other gains instead.
Timing matters as much as the asset itself. A disposal is dated by the contract date, not the settlement date, so a share sale executed on 4 April counts toward the old tax year even if the cash lands a week later. Crypto follows the transaction date on the chain. Get the year wrong and you can misplace an entire allowance or file a return for the wrong 12 months.
Some assets sit outside the net entirely: your main home while it qualifies for private residence relief, private cars, holdings inside ISAs, premium bonds, UK government gilts, and foreign currency held for personal spending. Long-term holders often track growth with an appreciation calculator so the taxable share of any future sale arrives as no surprise.
Allowable Costs That Shrink Your Gain
Your gain is not simply sale price minus purchase price. HMRC lets you deduct incidental acquisition costs such as legal fees, surveyor fees, valuation fees and stamp duty, plus capital improvements that genuinely enhanced the asset — a loft conversion or a new heating system counts, redecorating and routine repairs do not. Keep every invoice, because claimed costs with no records get disallowed on review.
Costs of disposal are deductible too: estate agency fees, solicitor charges, auction commissions and advertising. For landlords weighing a sale, running these deductions alongside a mortgage calculator shows the true equity released once the loan is settled and the tax office takes its slice.
Costs you cannot claim are the ones people try most often: mortgage interest on a buy-to-let, buildings insurance and everyday maintenance are revenue expenses handled under income tax rules instead. A survey fee from a failed purchase of a different property also fails, because the cost must relate to the asset you actually disposed of. When in doubt, leave it out rather than amend a submitted return later.
The Annual Exempt Amount and Why It Shrank
The annual exempt amount has been cut hard in recent years: £12,300 up to April 2023, then £6,000, then £3,000 from April 2024, where it stays frozen. The cut pulled hundreds of thousands of small investors into the reporting net, since a single decent share sale now clears the allowance on its own.
The freeze also erodes in real terms. Adjusted for price inflation — run the inflation calculator to see the effect — a frozen £3,000 shelters a smaller share of gains each year, which is exactly the direction HMRC intended. Planning disposals around the 5 April boundary now carries real money: splitting a sale across two tax years uses two allowances instead of one.
Trustees get their own smaller exempt amount, half the individual figure at £1,500. Reporting runs on a separate test: even where gains stay within the allowance, a Self Assessment return can still be required if your total disposal proceeds pass the reporting threshold. Selling one large holding can cross that threshold on its own, so check the current HMRC figures each year rather than assuming silence is safe.
How Your Income Band Sets the Rate
CGT rates follow your unused basic rate band. For 2026/27 the band sits at £37,700 of taxable income; whatever room remains after your salary, rent and dividends gets filled by gains at 18%, and anything above that pays 24%. A higher earner with no band left pays 24% on the whole taxable gain, while someone with £20,000 of income pays 18% on the first £17,700 of gains.
This is why the calculator asks for taxable income rather than gross salary. Pension contributions and salary sacrifice reduce taxable income and widen the 18% band at the same time, which can pull part of a large gain down from 24% to 18%. Pin your income figure down first with an annual salary calculator before trusting any CGT estimate.
Dividend income sits inside the band too, and the dividend allowance keeps shrinking, so a portfolio paying £8,000 of dividends leaves less room at 18% than it did a few years back. The interaction produces a rough edge for anyone near a boundary: moving £1,000 of gain across the 18% to 24% line costs an extra £60, which is why a precise income figure matters before you commit to a sale date.
Property Sales and Private Residence Relief
Selling your own home is usually tax-free because private residence relief covers the periods you lived there as your main residence, plus the final 9 months of ownership. Periods of letting or absence can reduce the relief, and since April 2020 lettings relief only applies where you shared the home with a tenant. Second homes and buy-to-let properties get no relief at all, so the full gain is chargeable.
Property sales carry their own deadline: a UK residential disposal must be reported to HMRC and the tax paid within 60 days of completion. Landlords deciding between holding and selling often stack the CGT estimate against ongoing returns using a rent calculator to see which side of the trade wins.
Non-residents selling UK property face their own regime and generally must report within 60 days regardless of whether tax is due. For residents, the online return covers the computation and the payment in a single submission through the HMRC service. Filing late is the expensive mistake, because the penalty regime is automatic and does not care that the tax itself was computed correctly.
Shares, Funds and Crypto Disposals
Share disposals follow strict matching rules: same-day trades match first, then acquisitions in the following 30 days, then your pooled section 104 holding. The 30-day rule kills the old bed-and-breakfasting trick of selling to bank a gain and instantly rebuying — the repurchased shares match the sale and the gain stays untouched.
Crypto works the same way: each sale, token-to-token swap or spend is a disposal, with costs pooled across all your tokens. Reinvested dividends raise your base cost over the years, which helps the tax-free growth compound — model that growth with a compound interest calculator — while dividends themselves fall under income tax rather than CGT, so run a dividend calculator for that separate layer.
Entrepreneurs selling qualifying business assets may qualify for Business Asset Disposal Relief, which taxes the first £1 million of lifetime gains at a lower 10% rate, though the relief rate is legislated to move toward the main CGT rates over the coming years. Check the current figure for the year of your sale before relying on it, because a few percentage points across a business sale is serious money.
Deadlines and Legitimate Ways to Cut the Bill
Non-property gains go through Self Assessment: report by 31 January following the tax year of disposal, with payment due the same day, and expect payments on account if the bill is large. Miss the 60-day property deadline and penalties start at £100 and climb from there. Set the money aside when you sell, not when HMRC comes asking.
The legitimate levers are real: transfer assets to a spouse to use both £3,000 allowances and both rate bands, move shares into an ISA through a bed-and-ISA trade, phase disposals across tax years, and claim every loss going. Investors comparing opportunities after tax should push the post-tax figure through an ROI calculator rather than trusting the headline return, since 24% off the top changes the ranking.
Payments on account catch people out in the first year of a large disposal: HMRC can demand half the expected CGT in advance for the following January and July. You can apply to reduce them when the gain was a one-off, and most single asset sales qualify. Budget for the tax, the possible advance payments and any accountant fees together, because the net figure after all three is the one that actually lands in your bank account.