UK Capital Gains Tax Guide 2026/27: Rates, Allowances & Exemptions

Capital Gains Tax (CGT) is charged on the profit you make when you sell (or "dispose of") an asset that has increased in value. This includes shares, investment properties, valuable personal possessions, and business assets. Your main home is usually exempt, but the rules around other property, shares, and crypto can catch people out. This guide covers the current rates, the reduced annual allowance, and practical strategies for managing your CGT liability.

CGT Rates for 2026/27

Following the changes in the October 2024 Budget, CGT rates on most assets were aligned with residential property rates. The result is a simpler but higher-tax system:

Your CGT rate depends on your total taxable income plus the gain. If adding the gain to your income keeps you within the basic-rate band (£37,700 above the personal allowance), you pay 18%. If it pushes you into the higher-rate band, the portion above the threshold is taxed at 24%.

The Annual Exempt Amount

Every individual has a tax-free allowance for capital gains each year. For 2026/27, the annual exempt amount is £3,000. This has been dramatically reduced over recent years:

The reduced allowance means many more people will have a CGT liability than in previous years. Even modest share portfolios or a small buy-to-let property sale can trigger a taxable gain. The allowance cannot be carried forward to future years; if you do not use it, you lose it.

What Is Exempt from CGT?

Several important exemptions exist:

• Your main residence: Private Residence Relief means no CGT on the sale of your primary home, provided you have lived in it as your main home throughout ownership
• ISAs: All gains within an ISA wrapper are completely tax-free
• Pensions: Gains within your pension fund are exempt
• Personal possessions worth under £6,000: Known as "chattels," items like jewellery, art, or antiques sold for under £6,000 each are exempt
• Your car: Cars are exempt regardless of value (classified as wasting assets)
• Gifts to charity: No CGT on assets donated to registered charities
• Transfers between spouses/civil partners: No CGT on transfers between married couples or civil partners (the receiving spouse takes on the original cost basis)
• Government gilts and premium bonds

Calculating Your Gain

The basic formula for CGT is:

1. Sale proceeds (what you sold it for)
2. Minus acquisition cost (what you paid for it, or its market value if gifted)
3. Minus allowable costs (stamp duty on purchase, legal fees, improvement costs)
4. Minus annual exempt amount (£3,000)
5. Minus any capital losses (from the same year or carried forward)
6. Equals taxable gain

Example: Selling a Buy-to-Let Property

You bought a flat for £180,000 in 2018 and sell it for £260,000 in 2026. You spent £5,000 on stamp duty when buying and £3,000 on legal fees for both transactions. You also spent £12,000 on a new kitchen (an improvement, not a repair).

• Sale proceeds: £260,000
• Minus acquisition cost: £180,000
• Minus allowable costs: £5,000 + £3,000 + £12,000 = £20,000
• Gain: £60,000
• Minus annual exempt amount: £3,000
• Taxable gain: £57,000
• Tax at 24% (higher-rate): £13,680

Using Capital Losses

If you sell an asset at a loss, you can use that loss to reduce your gains in the same tax year. If your losses exceed your gains, the excess can be carried forward indefinitely to offset against future gains. However, you must report losses to HMRC within 4 years of the end of the tax year in which they occurred.

Losses from the current year must be fully offset against gains before using the annual exempt amount. Brought-forward losses are used more efficiently because you only need to offset enough to reduce your gain to the annual exempt amount.

Strategies to Reduce CGT

• Use your ISA allowance: Gains within ISAs are completely tax-free. Bed and ISA (selling shares and repurchasing within your ISA) can shelter future gains.
• Use both spouses' allowances: Transfer assets to your spouse before selling to use both £3,000 annual exempt amounts. This is particularly effective for jointly held investments.
• Time disposals across tax years: If you have a large gain, consider splitting the sale across two tax years to use two annual exempt amounts.
• Offset losses: Consider selling loss-making investments in the same year as profitable ones to reduce your net gain.
• Pension contributions: Making pension contributions reduces your taxable income, which can keep more of your gain within the basic-rate band (taxed at 18% instead of 24%).
• Claim all allowable costs: Keep records of stamp duty, legal fees, surveyors, and genuine improvement costs (not repairs or maintenance).

Reporting and Payment Deadlines

The reporting requirements depend on the type of asset:

• UK residential property: Report and pay within 60 days of completion using HMRC's online CGT on UK property service. This is in addition to including it on your self-assessment return.
• All other assets: Report on your self-assessment tax return by 31 January following the end of the tax year. Pay any CGT due by the same date.

If you are not already registered for self-assessment, you will need to register by 5 October following the tax year in which you made the gain.

Business Asset Disposal Relief (BADR)

Formerly known as Entrepreneurs' Relief, BADR allows qualifying business owners to pay a reduced CGT rate on the first £1 million of lifetime gains when selling all or part of their business. The rate is 14% for disposals in 2025/26, rising to 18% from April 2026. To qualify, you must have owned the business for at least 2 years and meet specific criteria around shareholding and involvement in the company.