Capital Gains Tax (CGT) is the tax you pay when you sell something for more than you paid for it — a second property, shares or business assets. It catches many people by surprise, because the gain is taxed even though you may have owned the asset for years, and the reporting deadlines are short.
This guide explains capital gains tax in the UK — what it applies to, the £3,000 annual allowance, the current rates, and how to report a gain.
What Does Capital Gains Tax in the UK Apply To?
Capital gains tax in the UK can apply when you dispose of an asset, which usually means selling it, but can also include giving it away, swapping it or receiving compensation for it. Common examples include:
- Shares and other investments held outside an ISA or pension.
- Second properties and buy-to-let properties.
- Business assets, including the sale of a business or part of one.
- Personal possessions worth more than £6,000, such as jewellery or antiques (excluding cars and items with a limited life).
- Cryptoassets, which HMRC treats as property for tax purposes.
Some disposals are not taxable. Your main home is usually covered by Private Residence Relief, gains within an ISA or pension are exempt, and gifts to a spouse or civil partner are normally exempt from capital gains tax in the UK.
The £3,000 Annual Allowance
Everyone has an annual exempt amount for capital gains tax in the UK — currently £3,000 per tax year. You only pay tax on gains above this amount. If your total gains are £3,000 or less, you have nothing to pay, and you do not need a separate CGT return for them.
The allowance cannot be carried forward if you do not use it. Spouses and civil partners each have their own £3,000 allowance, which is why transferring an asset between spouses before a sale can sometimes save tax — but you must do this before the sale, not after.
Current CGT Rates: 18% and 24%
The rate you pay depends on your income tax band. The current rates — always check the rates that apply at the time you dispose of the asset, as they can change — are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, on most assets including residential property. If your gain pushes you from the basic rate into the higher rate, part of it is taxed at 18% and the rest at 24%.
Example: You make a gain of £20,000. After the £3,000 allowance, the taxable gain is £17,000. If you are a higher-rate taxpayer, the tax is £17,000 × 24% = £4,080. Business Asset Disposal Relief can reduce the rate on qualifying business disposals — check the current rate and conditions before you sell.
The 60-Day Rule for UK Residential Property
If you sell a UK residential property and capital gains tax in the UK is due, you must report the gain and pay the tax within 60 days of completion, using HMRC’s Capital Gains Tax on UK Property service. This deadline applies in addition to reporting the gain on your tax return for the year.
The 60-day rule does not apply if your main home is fully covered by Private Residence Relief, or if no CGT is due. But if tax is due, missing the deadline can result in penalties and interest.
How to Report a Gain
There are two main ways to report a capital gain:
- Through your Self Assessment tax return. Report the gain in the capital gains section of your return, and pay any tax by the usual 31 January deadline. Read our guide to Self Assessment tax return deadlines in the UK for the key dates, payments on account and penalties.
- Through HMRC’s Capital Gains Tax service, which is used for property disposals under the 60-day rule, and for reporting gains in the year if you do not normally file a tax return. Losses must be reported to HMRC within four years of the end of the tax year.
You can offset losses against gains made in the same tax year, and carry unused losses forward to future years. Keep good records of everything: the original cost, purchase and sale costs, improvement costs, and valuations at acquisition and disposal.
Practical Steps When You Plan a Disposal
- Work out the gain. Take the sale price, then deduct the purchase price and allowable costs such as estate agent and legal fees and the cost of improvements (not routine repairs).
- Apply your allowance and any reliefs. Deduct the £3,000 annual allowance and check whether reliefs such as Private Residence Relief or Business Asset Disposal Relief apply.
- Check your income tax band. This decides whether your gain is taxed at 18%, 24% or a mix of the two.
- Report within 60 days if it is residential property. Use HMRC’s property CGT service to report and pay.
- Keep all records. Keep contracts, completion statements, valuations and receipts, so the figures can be checked if HMRC asks.
If you also receive rental income from property, remember that Making Tax Digital for Income Tax will change how that income is reported — quarterly updates will be required for landlords with qualifying income over £50,000 from April 2026, and over £30,000 from April 2027.
Frequently Asked Questions
Do I pay Capital Gains Tax on my main home?
Usually not. Private Residence Relief covers a home you lived in throughout the time you owned it. If you let part of it out, or you did not live there for the whole period, some of the gain may be taxable.
What counts as a disposal?
Selling an asset is the most common disposal, but giving an asset away, swapping it or receiving compensation for it also counts. Gifts to a spouse or civil partner are normally exempt.
Can I use my spouse’s annual allowance?
Each person has their own £3,000 allowance. Transferring an asset to your spouse or civil partner before you sell can mean the gain is shared between two allowances — but it must be done before the sale, and the transfer itself must be genuine.
What if I make a loss?
You can use losses to offset gains made in the same tax year, and carry any unused losses forward to future years. You must report losses to HMRC within four years of the end of the tax year to claim them.
How We Can Help
Capital Gains Tax is easy to get wrong, from missing the 60-day property deadline to forgetting an available relief. Financial Accounting Firm advises on capital gains, prepares tax returns and helps you plan a disposal in advance. Contact us to discuss your position, or read about our capital gains tax advice on our Services page.
This article is general information only and should not be taken as personal tax or financial advice. Tax rules can change, and your position will depend on your own circumstances.
