Capital Gains Tax (CGT) catches many people off guard. You sell an asset — shares, a second home, a buy-to-let property — and suddenly HMRC wants a cut of the profit. Understanding how CGT works can save you thousands.
What Is Capital Gains Tax?
CGT is a tax on the profit you make when you sell or dispose of an asset that has increased in value. It’s not charged on the full sale price — only on the gain (the difference between what you paid and what you sold it for).
Assets that can trigger CGT:
- Second homes and buy-to-let property
- Shares and investments (not in an ISA or pension)
- Business assets
- Valuables worth over £6,000 (art, jewellery, antiques, collectibles)
- Cryptocurrency
Assets that are exempt:
- Your main home (Private Residence Relief)
- Cars and motor vehicles
- Personal possessions worth £6,000 or less
- ISAs and pension investments
- UK government gilts and Premium Bonds
- Shares in tax-free investment schemes (EIS, SEIS)
CGT Rates and Allowances (2026/27)
Annual Exempt Amount
Every individual gets a tax-free CGT allowance of £3,000 per tax year. This means you can realise gains of up to £3,000 without paying any CGT.
If you’re married or in a civil partnership, you each get your own £3,000 allowance — that’s £6,000 combined.
CGT Rates
| Asset Type | Basic Rate Taxpayer | Higher Rate Taxpayer |
|---|---|---|
| Property | 18% | 24% |
| Other assets (shares, crypto, valuables) | 18% | 24% |
Your tax rate depends on your total taxable income. Basic rate taxpayers pay 18%, while higher and additional rate taxpayers pay 24%.
Example calculation:
| Item | Amount |
|---|---|
| Sale price of second home | £250,000 |
| Original purchase price | £180,000 |
| Total gain | £70,000 |
| Less: annual exempt amount | -£3,000 |
| Taxable gain | £67,000 |
| CGT at 24% (higher rate) | £16,080 |
How to Reduce Your CGT Bill
1. Use Your Annual Allowance
Each person gets £3,000 of tax-free gains per year. If you’re planning to sell assets, consider spreading disposals across multiple tax years.
Example: Selling £10,000 of gains in one year costs £1,680 in CGT (at 24%). Spreading it over four years at £2,500 per year costs nothing — each year falls within the £3,000 allowance.
2. Transfer Assets to Your Spouse
Transfers between spouses or civil partners are exempt from CGT. If your spouse is a basic rate taxpayer and you’re a higher rate taxpayer, transferring assets before selling could save you money.
Important: The recipient inherits the original cost base. If your spouse sells immediately, the gain is calculated from your original purchase price.
3. Offset Losses Against Gains
If you’ve sold assets at a loss, use those losses to reduce your gains. Losses must be reported to HMRC within four years of the end of the tax year in which they occurred.
Example:
| Item | Amount |
|---|---|
| Gain from selling shares | £10,000 |
| Loss from selling other shares | -£4,000 |
| Net gain | £6,000 |
| Less: annual allowance | -£3,000 |
| Taxable gain | £3,000 |
| CGT at 24% | £720 |
Without the loss, you’d owe CGT on £7,000 (£1,680).
4. Hold Assets in an ISA
Any gains made within an ISA are completely tax-free. Before selling assets outside an ISA, consider transferring them into a Stocks & Shares ISA first.
Bed and ISA: Sell assets, withdraw the cash, then reinvest up to your £20,000 ISA allowance. Be aware of the 30-day rule — you can’t buy back the same asset within 30 days if you want to claim the loss.
5. Claim Private Residence Relief
Your main home is exempt from CGT. If you’ve used a property as your main home for the entire period of ownership, you get full relief. If you’ve rented it out or used it for business, you may still get partial relief.
Letting relief: If you let out your main home at any point, you may qualify for letting relief of up to £40,000 per person ( £80,000 for a couple).
6. Make Use of the £6,000 Rule
Personal possessions worth £6,000 or less when you sell them are exempt from CGT. This includes furniture, jewellery, artwork, and antiques. If an item was worth more than £6,000 when you bought it but is worth £6,000 or less when you sell it, there’s no CGT to pay.
Property CGT: Special Rules
If you sell a property that isn’t your main home (a second home, buy-to-let, or inherited property), there are specific rules:
60-Day Reporting Deadline
You must report and pay CGT on residential property sales within 60 days of completion. This is much shorter than the usual Self Assessment deadline.
How to report:
- Use HMRC’s real-time property disposal service online
- Report via your Self Assessment tax return (if you already file one)
- The 60-day deadline applies even if your total gains are below the annual allowance
Property CGT Calculation
| Component | How It’s Calculated |
|---|---|
| Sale price | What you sold it for |
| Purchase price | What you paid (including stamp duty and legal fees) |
| Improvement costs | Renovations that add value (not maintenance) |
| Selling costs | Estate agent fees, legal costs |
| Annual allowance | £3,000 |
Example: You sell a buy-to-let for £300,000 that you bought for £200,000. After £10,000 in legal and estate agent fees, your gain is £90,000. After the £3,000 allowance, you owe CGT on £87,000 — that’s £20,880 at 24%.
Inherited Property
If you inherit a property, the value at the date of death becomes your cost base. If the property has been the deceased’s main home, you may qualify for Private Residence Relief for the period they lived there.
How to Report and Pay
Self Assessment
If you already file a Self Assessment tax return, report your capital gains on the Capital Gains section. The deadline is 31 January following the end of the tax year.
Example: Gains made in the 2026/27 tax year (6 April 2026 to 5 April 2027) must be reported by 31 January 2028.
Real-Time Property Disposal Service
For residential property sales, use HMRC’s online service to report and pay within 60 days. You’ll need:
- The property address
- Completion date
- Sale price and purchase price
- Your National Insurance number
- A debit or credit card for payment
PAYE Code Adjustment
If you have other unpaid tax, HMRC may adjust your tax code to collect it through your wages.
CGT Planning Strategies
Year-End Planning
Consider the tax year end (5 April) when planning asset disposals:
- Use your remaining annual allowance before it expires
- Harvest losses before the year end to offset against gains
- Consider delaying gains into the next tax year to use a fresh allowance
Gift Assets to Charity
Donating assets to charity is exempt from CGT. You can also claim income tax relief on the value of the gift.
Invest Through Your Pension
Pension contributions reduce your taxable income, which could bring you back into the basic rate band for CGT purposes. A £10,000 pension contribution could save you £4,200 in CGT on a £10,000 gain (the difference between 24% and 18%).
Common CGT Mistakes
- Forgetting the 60-day property deadline — late filing incurs penalties and interest
- Not reporting losses — you must claim losses within four years
- Ignoring the annual allowance — don’t pay CGT on gains under £3,000
- Missing spouse transfers — transferring before selling can save thousands
- Not using ISAs — shelter gains from CGT by investing through an ISA
Where to Get Help
| Resource | What It Offers |
|---|---|
| HMRC CGT helpline | 0800 901 3020 — advice on reporting and paying |
| Personal Tax Account (gov.uk) | Report gains and pay online |
| Tax advisor | Professional advice for complex situations |
| HMRC CGT calculator | Estimate your tax bill before selling |
Capital Gains Tax doesn’t have to be a surprise. Plan ahead, use your allowances, and keep accurate records. The money you save on CGT is money you keep in your pocket.