Capital Gains Tax Explained: Rates, Allowance & How Much You Pay (2025/26)

Capital Gains Tax (CGT) is one of the most misunderstood UK taxes — partly because the allowance has shrunk so much that it now affects far more people. Here’s a clear explanation of how it works in 2025/26, and what you’ll actually pay.

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit you make when you sell (or “dispose of”) an asset that’s increased in value. Crucially, it’s the gain that’s taxed, not the full amount you receive.

You typically pay CGT on:

Shares (outside an ISA or pension)
A second home or buy-to-let
Business assets
Valuable possessions (worth over £6,000, excluding your car)

Some things are exempt: your main home (usually), ISAs and pensions, your car, and UK government gilts.

The £3,000 allowance

Everyone gets an annual exempt amount — for 2025/26 it’s £3,000. The first £3,000 of gains each tax year is tax-free.

This allowance has been slashed in recent years (it was £12,300 as recently as 2022/23), which is why so many more people now face a CGT bill on share sales and property. It can’t be carried forward — if you don’t use it in a tax year, it’s gone.

The rates for 2025/26

After deducting the allowance, your gain is taxed at:

Band	Rate (2025/26)
Within your basic-rate band	18%
Above the basic-rate band	24%

The key mechanic: the gain stacks on top of your income. Your taxable income is counted first to see how much of your basic-rate band is left; the gain fills that (at 18%), and anything above is taxed at 24%. So a large gain can be split across both rates. Our free Capital Gains Tax calculator works it out.

How to calculate your gain

Sale proceeds minus what you paid = your raw gain
Deduct allowable costs — buying and selling fees, and the cost of improvements (not repairs)
Deduct the £3,000 annual exempt amount
Apply 18% / 24% based on your income

When you pay it

This trips people up because there are two different deadlines:

Most assets (shares etc.): report and pay through Self Assessment by 31 January
UK residential property: report and pay within 60 days of completion via HMRC’s property service

Miss the 60-day property deadline and there are penalties — so plan for it before you sell.

Reducing your Capital Gains Tax

There are several legitimate ways to lower a CGT bill — using your allowance, transferring assets to a spouse, offsetting losses, and reliefs like Private Residence Relief and Business Asset Disposal Relief. We cover them in how to avoid Capital Gains Tax.

Get your CGT right — and the timing too

With the allowance now just £3,000 and the 60-day property rule in force, CGT catches far more people than it used to — and the planning genuinely matters. Our Capital Gains Tax service handles the calculation and the 60-day return, and makes sure every relief and allowable cost is claimed so you pay no more than you legitimately owe.

Frequently asked questions

How much is Capital Gains Tax in 2025/26?

For 2025/26, after the £3,000 annual exempt amount, gains on most assets (like shares) are taxed at 18% within your basic-rate band and 24% above it. Residential property follows the same 18%/24% rates. Your income determines how much of the gain falls into each band, because the gain stacks on top of your other income.

What is the Capital Gains Tax allowance for 2025/26?

The annual exempt amount is £3,000 for 2025/26 — the first £3,000 of gains each tax year is tax-free. It's been cut sharply in recent years (it was £12,300 in 2022/23), so far more disposals now create a tax bill. The allowance can't be carried forward, so it's use-it-or-lose-it each year.

What do I pay Capital Gains Tax on?

On the profit (gain) when you sell or dispose of an asset that's gone up in value — typically shares, a second home, a buy-to-let, business assets, or valuable personal possessions. Your main home is usually exempt, and some assets (like ISAs, your car, and UK government gilts) are exempt entirely.

How is Capital Gains Tax calculated?

Work out your gain (sale proceeds minus what you paid and your allowable costs), deduct the £3,000 annual exempt amount, then tax the rest at 18% within your remaining basic-rate band and 24% above it. Your taxable income is counted first to see how much basic-rate band is left for the gain.

When do I pay Capital Gains Tax?

For most assets, you report and pay through Self Assessment by 31 January after the tax year. But for UK residential property, you must report and pay within 60 days of completion using HMRC's online property service — a much tighter deadline that catches people out.

Related services

Reviewed by Provense Accountants

Written and reviewed by our team of qualified accountants (AAT-regulated). This guide is general information, not personal tax advice — book a free consultation for advice on your situation.