UK Capital Gains Tax Explained (2025/26)

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax on the profit when you dispose of an asset that has gone up in value. It is the gain that is taxed, not the amount of money you receive. If you bought shares for £8,000 and sold them for £15,000, CGT is calculated on the £7,000 gain — not the £15,000 proceeds. "Disposal" covers selling, gifting, swapping, or receiving compensation for an asset.

Most people meet CGT through shares held outside an ISA, second properties, cryptoassets, valuable personal possessions worth over £6,000, and business sales. Disposals inside an ISA, a SIPP, or a workplace pension are exempt. So is the sale of your only or main residence, in most cases, under Private Residence Relief.

The UK Capital Gains Tax calculator applies the 2025/26 rules — the reduced £3,000 allowance and the unified 18% / 24% rates — and shows the band-by-band split so you can see exactly where the tax comes from.

The £3,000 Annual Exempt Amount

Every UK individual has an Annual Exempt Amount (AEA). The first slice of net gains in a tax year is tax-free. The recent history of the allowance is striking:

• 2020/21 to 2022/23: £12,300
• 2023/24: £6,000
• 2024/25: £3,000
• 2025/26: £3,000

In three tax years the allowance has fallen by 75%. A portfolio that comfortably stayed inside CGT cover in 2022 can produce a tax bill in 2025 with no change in size or behaviour. The allowance does not roll over — use it in the year, or lose it. Trustees and personal representatives have a separate allowance set at half the individual rate, so £1,500 in 2025/26.

The single biggest planning consequence of the cut is that "harvesting" gains — disposing in tranches across tax years to use the allowance each year — is now far less effective. Two people each have £3,000 rather than £12,300; spousal transfers (see below) become more important precisely because the per-person allowance is small.

The 18% / 24% rate structure

For disposals on or after 30 October 2024, CGT in 2025/26 is charged at two rates:

• 18% on gains within your remaining basic-rate band
• 24% on gains above the basic-rate band

Before the October 2024 Budget, residential property gains were taxed at 18% / 24% but gains on other assets — shares, crypto, business interests outside BADR — were taxed at 10% / 20%. The Budget unified the rates upward: shareholders and crypto holders saw their headline higher-rate bill jump from 20% to 24%. From 6 April 2025 the rates apply to both classes equally and the calculator uses the post-Budget figures.

Two CGT rate variants are not unified and need separate handling. Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, is charged at 14% in 2025/26 and rises to 18% from 6 April 2026 — with a £1m lifetime limit and qualifying-trading-company conditions. Carried interest paid to fund managers is taxed at 32% from 6 April 2025. The Capital Gains Tax calculator handles the mainstream 18% / 24% case; BADR and carried interest need a specialist accountant.

How CGT stacks on top of your income

The most important mechanic to grasp is that gains are added on top of your other income for the purpose of working out which rate applies. HMRC works through the calculation in this order:

1. Net gains = total gains − allowable losses (current year and brought-forward)
2. Taxable gains = net gains − £3,000 Annual Exempt Amount
3. Other income (salary, pension, rental, dividends) fills the personal allowance and basic-rate band first
4. Whatever capacity remains in the £37,700 basic-rate band is taxed at 18% on gains
5. Anything above is taxed at 24%

The personal allowance is £12,570 and the basic-rate band runs for another £37,700 above it, ending at £50,270 of total taxable income. Three quick implications:

• An individual with no other income can shelter £12,570 + £37,700 + £3,000 = £53,270 of gross gains at 0% / 18% before the 24% rate starts to bite.
• An additional-rate earner already past £125,140 has zero basic-rate band remaining, so every taxable gain is at 24%.
• A taxpayer near the £50,270 boundary can find a single disposal straddles 18% and 24% — small changes in the size or timing of the disposal move the split.

Worked example

Salary £35,000. Total gains in 2025/26 are £20,000. No losses to offset. Tax year 2025/26.

• Other income above personal allowance: £35,000 − £12,570 = £22,430
• Basic-rate band remaining: £37,700 − £22,430 = £15,270
• Net gains: £20,000 − £0 losses = £20,000
• Taxable gains: £20,000 − £3,000 allowance = £17,000
• £15,270 taxed at 18% = £2,748.60
• £1,730 taxed at 24% = £415.20
• Total CGT: £3,163.80

Effective rate on net gains is £3,163.80 / £20,000 ≈ 15.8%, well below the headline 24%. Most of the tax is at 18% because the salary leaves most of the basic-rate band free. Increase the salary to £50,000 and the same £20,000 gain produces £4,080 of CGT (the whole £17,000 taxable amount falls in the higher-rate band at 24%) — a 29% increase in tax for the same gain. The Capital Gains Tax calculator shows this band split for any income and gain combination.

Allowable losses and the four-year rule

Allowable losses are losses on chargeable assets — the same kinds of assets that would be subject to CGT had they made a gain. They reduce gains pound-for-pound, but the rules on when and how they can be used are specific.

Current-year losses must be set against current-year gains in full, even if doing so wastes part of your £3,000 allowance. Carried-forward losses are different — you only use as much as you need to bring net gains down to the £3,000 AEA. The remainder stays available for a future year.

To preserve a loss for future use, report it to HMRC within four years of the end of the tax year in which the loss arose. After that the loss is no longer available. The simplest way is to report on a Self Assessment return; if you are not in Self Assessment you can write to HMRC instead. Don't assume an unreported loss is permanently in the bank — it has to be claimed in time.

Losses on connected-party disposals (typically gifts to family members other than spouses) are ring-fenced and can only be set against gains from the same connected party. Losses from a business that became worthless can be claimed via a "negligible value" claim, which is useful for failed share investments.

Reporting and paying: deadlines that catch people out

UK residential property has its own faster reporting regime. From the date of completion you have 60 days to report the disposal and pay any CGT due via the HMRC "CGT on UK Property" service. This applies to second homes, buy-to-let properties, holiday homes, and inherited property where Private Residence Relief does not cover the full gain. The buy-to-let mortgage calculator can help with the wider numbers around a BTL disposal.

Other gains — shares, crypto, business assets, valuable personal possessions — are reported on a Self Assessment return for the tax year of disposal. The deadline is 31 January after the end of the tax year, the same date the tax must be paid. A 2025/26 share disposal is reported and paid by 31 January 2027.

You must report — even when no tax is due — if either of these triggers applies:

• Total gains exceed the £3,000 allowance
• Total proceeds (the cash received, not the gain) exceed £50,000

The proceeds threshold catches people who think a loss-making sale doesn't need reporting. It does, if the cash crossed £50,000.

How to reduce your Capital Gains Tax bill

Use ISAs and pensions

The simplest shelter is to hold investments inside a Stocks & Shares ISA or pension. Disposals inside the wrapper are CGT-free and do not count against the £3,000 allowance. The annual ISA allowance is £20,000 per person; couples can shelter £40,000 a year. The ISA savings calculator models how much long-run tax sheltering is worth on a given pot.

"Bed & ISA" — selling outside the wrapper and immediately repurchasing inside — does crystallise the CGT disposal on the sale. Plan the size of the move to use the £3,000 allowance and any losses, rather than triggering an unnecessary bill.

Transfer assets to a spouse or civil partner

Transfers between spouses or civil partners who are living together are made on a "no gain, no loss" basis — no CGT is triggered, but the receiving spouse inherits the original cost. This effectively doubles the household allowance to £6,000 and lets the lower-income spouse crystallise a gain into their unused basic-rate band at 18% rather than 24%. It is one of the few high-value CGT-planning moves that remains entirely straightforward.

Harvest losses in the same tax year

If you hold loss-making positions you intended to sell anyway, crystallising them in the same tax year as a gain reduces taxable gains pound-for-pound. The "30-day rule" prevents selling and rebuying the same asset within 30 days to manufacture a loss — buy a materially different asset, hold the cash, or wait 30 days.

Time the disposal across tax years

A large disposal split across 5 April uses two annual allowances and two basic-rate band capacities. The constraint is sequencing risk: the price could move against you before the second tranche is sold. For an asset you'd hold either way, splitting can be sensible; for an asset you wanted out of, the price-risk cost may exceed the tax saving.

Claim Private Residence Relief properly

Your only or main residence is exempt under PRR, but the relief can be partial if the property was let, used for business, or unoccupied for periods. The final 9 months of ownership are deemed exempt, but earlier periods may not be. If a property has spent any time as a rental, model the relief carefully — guidance is in HMRC manual CG64200 onwards.

Consider EIS/SEIS deferral

Reinvesting a gain into qualifying Enterprise Investment Scheme shares can defer the CGT liability until the EIS shares are sold. SEIS offers a 50% reinvestment exemption rather than deferral. These schemes carry significant investment risk — the tax tail should not wag the investment dog — but for high gains where deferral is valuable, they are worth a conversation with an adviser.

Common mistakes

Forgetting historic base cost

For long-held shares, particularly those acquired through employee schemes, scrip dividends, demutualisations, or corporate actions, the original cost can be hard to reconstruct. HMRC will accept reasonable estimates supported by evidence; "unknown" is not a sustainable answer. The 1965 / 1982 rebasing rules cover assets held since before March 1982.

Treating the £50,000 proceeds threshold as a tax threshold

It isn't a tax threshold — it's a reporting trigger. You can have zero CGT to pay and still need to file because proceeds crossed £50,000. The penalty for non-filing applies even when no tax is owed.

Missing the 60-day property window

Residential property disposals must be reported within 60 days of completion. Solicitors will sometimes ask the client to handle the CGT filing themselves; the deadline is short and easy to miss in the post-completion paperwork shuffle. Penalties start at £100 and escalate.

Ignoring the dividend tax interaction

Dividend income increases your "other income" for the purposes of the basic-rate band, even though dividends are taxed at their own rates. A dividend-heavy portfolio can quietly push gains into the 24% band. The dividend tax calculator shows the income side; combine the result with the CGT calculator to see the full picture.

When to seek professional advice

The Capital Gains Tax calculator handles the mainstream individual case for the 2025/26 tax year. It does not handle Business Asset Disposal Relief, carried interest, Investors' Relief, the 30-day rule for share matching, partial PRR on residential property, non-UK source disposals for non-domiciled taxpayers, or trust and estate disposals. Any of those needs a chartered accountant (ICAEW or ACCA) or a Chartered Tax Adviser (CTA / ATT).

Get advice before you dispose, not after. Reorganising ownership, timing a sale across tax years, claiming reliefs, or preserving losses all need to be in place at the point of disposal. Once contracts are exchanged the tax position is largely fixed.

Calculators are planning tools. They give you the maths, fast, on rules as they stand today. They do not give you a personal tax recommendation, and they do not replace the conversation with an adviser when the numbers are large, the structure is complex, or the rules might change at the next Budget.

Frequently asked questions

See the FAQ section on the Capital Gains Tax calculator page for direct answers to the most common questions about the £3,000 allowance, the 18% / 24% rates, reporting deadlines, and which reliefs the calculator does and does not cover.