UK Capital Gains Tax Guide (Allowances, Rates, 2026/27)

What Is Capital Gains Tax?

Capital Gains Tax is charged on the profit you make when you sell or dispose of an asset that has increased in value. It is not charged on the total sale proceeds — only on the gain (sale price minus the original cost, adjusted for allowable expenses). CGT applies to: shares and investment funds held outside an ISA or pension; second homes and buy-to-let properties (but not your main residence, which is exempt under Principal Private Residence Relief); business assets; personal possessions worth £6,000 or more (e.g., valuable jewellery, art, antiques); and cryptocurrency. CGT does NOT apply to: assets held in an ISA or SIPP (completely tax-free); your main home (unless you have let it out or used it for business); UK government gilts and premium bonds; assets you give to your spouse or civil partner; personal possessions worth less than £6,000; and assets you sell at a loss (you can offset losses against gains). The tax is calculated on your total net gains for the tax year (6 April to 5 April), after deducting the annual exempt amount (£3,000 for 2026/27). You only pay CGT on gains above this threshold. Reporting is done through your annual self-assessment tax return. If your gains are below the annual exempt amount, you do not need to report them. Using ISAs to avoid CGT →

Annual Exempt Amount

The annual exempt amount (AEA) is the amount of capital gains you can realise in a tax year before paying any CGT. For the 2026/27 tax year, the AEA is £3,000 per individual. This has been dramatically reduced from £12,300 in 2022/23 as part of the government's fiscal consolidation. The reduction means far more investors will be caught by CGT when selling investments outside an ISA. Key rules: the AEA cannot be carried forward — if you do not use it in a tax year, it is lost. Couples who are married or in a civil partnership can transfer assets between each other without triggering CGT, effectively allowing them to use both allowances (£6,000 combined). This is known as the bed and spouse strategy. The AEA is applied to your total net gains for the year after deducting any allowable losses. If your gains are exactly £3,000, you pay no CGT. If they are £5,000, you pay CGT on £2,000. The AEA is a use-it-or-lose-it allowance — if you have assets with unrealised gains sitting outside an ISA, you may want to sell some each year to use your allowance (a strategy called tax gain harvesting). You can then immediately repurchase the assets (though watch the bed-and-breakfasting rules for shares — see below). For most investors, the reduced AEA makes it much more important to invest inside an ISA. With a £3,000 allowance, even a moderately successful investment portfolio outside an ISA will quickly exceed the threshold. Investing tax-efficiently →

CGT Rates 2026/27

The rate of CGT you pay depends on your income tax band and the type of asset. Basic-rate taxpayers (income below £50,270 in 2026/27): 10% on gains from most assets (shares, funds, business assets) and 18% on gains from residential property (second homes, buy-to-let). Higher-rate taxpayers (income above £50,270): 20% on gains from most assets and 24% on gains from residential property. Additional-rate taxpayers (income above £125,140): 20% on most assets, 24% on property. The property surcharge (18%/24% vs 10%/20%) reflects the government's policy of making property investment less tax-advantaged than financial investment. However, the main residence (your home) is exempt from CTA entirely. Special reliefs: Business Asset Disposal Relief (formerly Entrepreneurs' Relief) — 10% on lifetime gains of up to £1 million from selling a business or shares in a qualifying company. Investors' Relief — 10% on gains of up to £10 million from shares in qualifying unlisted companies (held for at least 3 years). The CGT rates are significantly lower than income tax rates (up to 45%) and dividend tax rates (up to 39.35%). This creates an incentive for business owners and investors to structure income as capital gains where possible — a legitimate tax planning strategy. However, HMRC has anti-avoidance rules to prevent artificially converting income into capital gains. Dividend tax rates →

What Triggers CGT

CGT is triggered by a disposal — any event where you give up ownership of an asset. The most common triggers are: selling shares or funds outside an ISA — each sale of a profitable position is a taxable event. If you sell multiple shares throughout the year, all gains and losses are aggregated to calculate your net gain. Selling a second home or buy-to-let property — property gains are reported differently and may require an additional tax return within 60 days of completion. Gifting assets (except to a spouse or civil partner) — if you give shares, property, or other assets to someone else (including children or a trust), HMRC treats it as a disposal at market value, even though you received no money. This is a common trap for parents transferring assets to children. Selling cryptocurrency — HMRC treats cryptoassets as property, and each sale, trade, or disposal (including swapping one cryptocurrency for another) is a taxable event. Death — generally exempt from CGT. When you die, your assets pass to your beneficiaries at the market value at death, and any gains during your lifetime are not subject to CGT. This is known as the "death uplift" and is a key estate planning consideration. Bed-and-breakfasting rules — if you sell shares and buy the same shares back within 30 days, HMRC treats the two transactions as one for tax purposes, preventing you from creating an artificial loss while maintaining your position. If you want to repurchase after selling, wait at least 31 days. CGT and inheritance planning →

Calculating Gain

Calculating your capital gain is relatively straightforward for most assets. The calculation is: gain = disposal proceeds minus allowable costs. Allowable costs include the original purchase price, acquisition costs (broker fees, stamp duty, legal fees), and enhancement expenditure (costs that increase the asset's value, such as a home extension on a buy-to-let property). You cannot deduct ongoing expenses like management fees or interest (these are separate income tax deductions). Indexation allowance — historically, you could increase your cost base by inflation (the indexation allowance) to reduce the taxable gain. This was frozen in January 2018 and is no longer available for individuals. Only companies can still use indexation. Share pooling rules — shares of the same class in the same company are pooled into a single holding for CGT purposes. When you sell some shares, the cost is calculated as the average cost of all shares in the pool (the "pooled cost" or "section 104 holding"). This prevents you from selecting the highest-cost shares to minimise the gain. Matching rules — when you sell shares, they are matched against purchases in a specific order: same-day purchases (matched first), then purchases within the following 30 days (bed-and-breakfasting rule), then the share pool (section 104 holding). The 30-day rule is critical — if you sell shares and buy them back within 30 days, the disposal is matched with the new purchase, meaning no gain or loss is crystallised. For buy-to-let property, the calculation is similar but includes purchase and sale legal fees, stamp duty land tax, and estate agent fees. Tax planning strategies →

Minimising CGT

There are several legitimate strategies to minimise your CGT bill. Use your ISA allowance — this is the single most effective strategy. Invest up to £20,000 per year in a Stocks and Shares ISA, where all gains are completely tax-free. Over time, moving assets into ISAs shelters your wealth from CGT. Use your pension annual allowance — gains within a SIPP are also tax-free. Pension contributions also receive tax relief at your marginal rate, making pensions extremely tax-efficient. Bed and spouse — transfer assets to your spouse or civil partner before selling. They have their own £3,000 annual exempt amount, potentially doubling the tax-free allowance to £6,000 for a couple. Transfers between spouses are tax-free, so there is no CGT cost to the transfer itself. Harvest losses — if you have investments that have fallen in value, selling them crystallises a loss that can be offset against gains in the same tax year (or carried forward). This is known as tax-loss harvesting. Be careful of the bed-and-breakfasting rules if you want to repurchase. Time disposals across tax years — if you have a large gain, consider selling some in March (before the 5 April year-end) and the rest in April (after the new tax year starts), effectively using two years' worth of allowances. Hold assets until death — death is a CGT-free event, and your beneficiaries inherit assets at the market value at death, with no CGT on the gains during your lifetime. This is the ultimate CGT deferral strategy. Use EIS and SEIS reliefs — investments in the Enterprise Investment Scheme and Seed Enterprise Investment Scheme can defer or eliminate CGT on other gains. Venture Capital Trusts (VCTs) — offer income tax relief and CGT deferral. These are higher-risk investments that should only be considered as part of a sophisticated tax planning strategy. Estate planning and CGT →

FAQs

What is the CGT annual exempt amount for 2026/27?

The annual exempt amount is £3,000 per individual for 2026/27. This is down from £12,300 in 2022/23. Couples can effectively achieve £6,000 by transferring assets between themselves before selling. Any unused allowance cannot be carried forward to the next tax year.

Do I pay CGT on shares in an ISA?

No. All capital gains within an ISA are completely exempt from CGT. This is the primary reason to use your ISA allowance before investing in a General Investment Account. The tax saving can be substantial — a gain of £10,000 inside an ISA is tax-free; outside an ISA, it would trigger a CGT bill of £1,400 (higher-rate taxpayer).

Can I avoid CGT by reinvesting the proceeds?

No. Unlike some other countries, the UK does not have a "reinvestment relief" that defers CGT when you reinvest sale proceeds (except for certain reliefs like EIS deferral relief). Once you sell an asset, the gain is crystallised and CGT is due regardless of what you do with the money.

What is the 30-day rule for shares?

The 30-day rule (bed-and-breakfasting rule) prevents you from selling shares to crystallise a gain or loss and then immediately repurchasing them. If you sell shares and buy the same shares back within 30 days, the disposal is matched with the new purchase, so no gain or loss is recognised for tax purposes.

How do I report and pay CGT?

You report capital gains on your self-assessment tax return for the tax year in which the disposal occurred. If you sell a residential property, you must report and pay the CGT within 60 days of completion using HMRC's property disposal service. For other assets, the gain is reported in your annual self-assessment and the tax is due by 31 January following the tax year.