What CGT is — and what it isn't

Capital gains tax is charged on the profit when you dispose of an asset — sale price minus what you paid, minus buying and selling costs. "Dispose" is wider than "sell": gifting an asset (to anyone except your spouse or a charity) counts, at market value. It is not a tax on the money you receive, only on the gain; selling something for less than you paid creates a loss, which is itself useful (below).

Plenty is exempt before you even start: your main home (usually), anything inside ISAs and pensions, UK government gilts and Premium Bonds, personal cars, and possessions sold for under £6,000. CGT is mostly a tax on unwrapped shares and funds, second properties, business assets and crypto.

The 2025/26 numbers

  • Annual exempt amount: £3,000 of gains per person per tax year, tax-free. Use it or lose it — it cannot be carried forward. (It was £12,300 as recently as 2022/23; the cut is why CGT now catches ordinary investors.)
  • Rates: 18% within your basic-rate band, 24% above it — now the same for shares and residential property.
  • Figures move in Budgets more often than most taxes — treat every number here as "check each April".

How the bill is actually worked out

Gains are stacked on top of your taxable income to decide which rate applies. Example: taxable income of £35,000 leaves about £15,270 of basic-rate band (to £50,270). A £20,000 taxable gain after the allowance uses that headroom first — £15,270 taxed at 18%, the remaining £4,730 at 24%. Two consequences follow: a bonus or pay rise can push your gains into the higher rate, and anything that extends your basic-rate band — like a pension contribution — trims the CGT rate too.

The 60-day property deadline

Gains on UK residential property (a let flat, a second home) must be reported and the tax paid within 60 days of completion, through HMRC's separate property CGT service — not months later via self assessment. Solicitors don't always volunteer this, and the late-filing penalties are automatic. Nothing to report if the gain is fully covered by private residence relief.

Legitimate ways to reduce it

  1. Use the £3,000 every year you hold assets with gains — realising gains gradually beats one big taxable event. This is a core item on the tax year-end checklist.
  2. Transfers between spouses are no-gain-no-loss — moving assets to whichever partner has the lower rate and an unused allowance doubles the household's tax-free gains, legitimately and routinely.
  3. Offset losses. Losses in the same year net off automatically; older losses carry forward indefinitely — but only if claimed to HMRC within four years of the tax year they arose. Log them even in bad years.
  4. Bed-and-ISA: sell unwrapped investments (using the allowance) and rebuy them inside an ISA, where all future gains are tax-free. Rebuying the same investment outside a wrapper within 30 days doesn't reset the cost base — the wrapper is what makes it work.
  5. Pension contributions extend the basic-rate band, which can pull gains from 24% back to 18% in the same year you get income tax relief. See pensions explained.

Reporting and records

Property has its own 60-day service. Everything else goes on self assessment (or HMRC's "real time" CGT service if you don't normally file) once gains exceed £3,000 — and note you must also report if total proceeds exceed £50,000, even with no tax due. Keep contract notes, completion statements and improvement receipts for as long as you hold the asset plus six years: your future self, or your executor, will need the purchase price.

Common questions

Do I pay capital gains tax when I sell my home?
Usually no — private residence relief exempts a property that has been your only or main home throughout ownership. The exceptions matter though: periods you let it out or lived elsewhere, grounds over half a hectare, part of the home used exclusively for business, or a property you own but never lived in (including inherited ones you then sell after prices rise). Second homes and buy-to-lets get no relief at all.
Is cryptocurrency subject to capital gains tax?
Yes. HMRC treats crypto as an asset, not currency — so selling it, swapping one coin for another, spending it, or gifting it (except to a spouse) are all disposals, each crystallising a gain or loss at that day's market value. Exchanges increasingly share data with HMRC, and the swap-is-a-disposal rule means active traders can owe tax without ever converting back to pounds.
Do I pay CGT if I give shares to my children?
Yes — a gift to anyone other than your spouse or civil partner is a disposal at full market value, even though no money changed hands, so gains above your allowance are taxable. Gifts between spouses transfer at no gain and no loss, which is why couples routinely move assets between each other before selling. A gift can also have inheritance tax consequences — see our guide to gifting money to family.

Sources and further reading

GOV.UK — capital gains tax · GOV.UK — report and pay CGT · GOV.UK — tax when you sell your home · MoneyHelper

About this guide: general education only — not regulated advice, tax advice or a personal recommendation, and FinancialAdvisor.co.uk is not an FCA-authorised firm. CGT interacts with income, residency and reliefs in ways that reward personal advice from an accountant or FCA-authorised adviser; figures are 2025/26 and change.