Capital Gains Tax: How the Calculation Works (2025/26)
Capital Gains Tax (CGT) applies when you dispose of an asset for more than you paid for it. "Dispose" includes selling, gifting, or transferring. The tax applies to the gain, not the total proceeds — and the rate depends on the type of asset and your income tax band.
The Core Calculation
Taxable Gain = Sale Proceeds − (Acquisition Cost + Allowable Costs) Allowable Costs include: - Purchase price + stamp duty paid at purchase - Legal and agent fees at purchase and sale - Improvement costs (not maintenance) - Capital Losses from other disposals in same year
CGT Rates 2025/26
| Asset Type | Basic Rate Taxpayer | Higher/Additional Rate Taxpayer |
|---|---|---|
| Shares, funds, investments | 18% | 24% |
| Residential property | 18% | 24% |
| Business assets (BADR) | 10% | 14% (rising to 18% from April 2026) |
| Other assets | 18% | 24% |
Note: CGT rates were changed in October 2024 Budget. Residential property rates aligned with other assets from April 2025.
Annual Exempt Amount
Each individual has an annual CGT exemption: £3,000 for 2025/26. Gains below this threshold are tax-free. This cannot be carried forward if unused. Married couples and civil partners each have their own exemption (£6,000 combined).
What-If Scenarios
Scenario 1: Share sale, basic rate taxpayer
Bought shares for £12,000 in 2019, sold for £28,000 in 2025
| Item | Amount |
|---|---|
| Gain | £16,000 |
| Annual exemption | −£3,000 |
| Taxable gain | £13,000 |
| CGT at 18% | £2,340 |
Scenario 2: Second property sale, higher rate taxpayer
Bought BTL property for £180,000 (2015) + £5,000 costs, sold for £310,000 + £8,000 selling costs
| Item | Amount |
|---|---|
| Net proceeds | £302,000 |
| Acquisition + costs | −£185,000 |
| Gross gain | £117,000 |
| Annual exemption | −£3,000 |
| Taxable gain | £114,000 |
| CGT at 24% | £27,360 |
Scenario 3: Bed-and-ISA tax planning
Selling investments and immediately repurchasing within a Stocks & Shares ISA "crystallises" a gain within your annual exemption, sheltering future growth from CGT permanently. On £3,000 of gains per year, this saves up to £720/year for a higher rate taxpayer.
Reporting Requirements
From April 2020, UK residents must report and pay CGT on residential property within 60 days of completion. Other assets are reported via Self Assessment by 31 January. You must report even if no tax is due, if total proceeds exceed 4× the annual exemption (£12,000).
Frequently Asked Questions
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Indicative only. Tax rules change. This guide reflects 2025/26 rates. Consult a qualified tax adviser for personal CGT calculations and planning.