Capital Gains Tax, Completely Decoded

1. Rates & Annual Exempt Amount

For the 2026/27 tax year (6 April 2026 to 5 April 2027), Capital Gains Tax is charged at two flat rates that depend on your total taxable income plus the gain. Following the Autumn Budget 2024 changes that took effect on 30 October 2024, the rates for residential property gains and other gains are now aligned:

Until 29 October 2024, the rates for non-residential gains were lower (10% basic / 20% higher) while residential property was already at 18% / 24%. The Autumn Budget unified them. If you realised a non-property gain before 30 October 2024, the old lower rates applied to that gain.

The Annual Exempt Amount (AEA)

Every individual gets a £3,000 annual exempt amount for 2026/27. This is the amount of gains you can realise each tax year completely tax-free. It cannot be carried forward to the next year — if you don't use it, you lose it.

The AEA has been slashed dramatically over recent years:

At £3,000, the AEA shelters only a modest gain — for example, the first £3,000 of profit on a share sale. But it still represents up to £720 of tax saved (£3,000 × 24%), or £1,440 for a couple who each use theirs. Use it or lose it, every April.

For trustees, the AEA is half the individual amount: £1,500, shared across all trusts created by the same settlor (minimum £300 each).

HMRC reference: Capital Gains Tax rates and allowances (gov.uk).

2. Worked example — gain straddling the basic-rate band

Meet Toni — £35,000 salary, £25,000 share gain

Toni works in marketing, earning £35,000 gross. In January 2027 she sells shares in a former employer's share scheme for a £25,000 gain. She has no other gains and no capital losses. Here is how CGT is calculated, step by step.

Step 1 — Net chargeable gain

Gross gain: £25,000. Subtract the AEA: £25,000 − £3,000 = £22,000 net chargeable gain.

Step 2 — Remaining basic-rate band

Toni's taxable income is £35,000 − £12,570 personal allowance = £22,430. The basic-rate band runs from £12,571 to £50,270, giving a total basic-rate band width of £37,700. Remaining basic-rate band: £37,700 − £22,430 = £15,270.

Step 3 — Split the gain across bands

Toni's effective CGT rate on the full £25,000 gain is about 17.5% (£4,363.80 / £25,000). If her salary had been £55,000 instead, the entire net gain would have sat above the basic-rate band and the bill would have been £22,000 × 24% = £5,280.

3. Reporting rules

Self Assessment reporting

You must report capital gains through Self Assessment if, in the tax year, the total proceeds from all disposals exceed £50,000 — even if the actual gain is covered by your AEA, losses, or other reliefs. Below that threshold, you still need to report if you have tax to pay, but you may not need to file a Self Assessment return solely for CGT.

In practice, if you sold shares through a broker for £60,000 but your gain was only £2,000 (below the £3,000 AEA), you must still complete the capital gains pages on your return because the proceeds exceeded £50,000.

The 60-day UK residential property rule

If you sell (or otherwise dispose of) a UK residential property and there is CGT to pay — for instance, a buy-to-let or a second home — you must report the gain and pay the tax within 60 days of completion. This is a standalone report filed via the HMRC CGT on UK property service, separate from your annual Self Assessment return.

The 60-day clock starts from the date of completion (not exchange of contracts). The gain is estimated at that point and any tax paid is credited against the final liability when you file your annual return. Getting this wrong triggers automatic late-filing penalties: £100 immediately, another £100 after three months, and daily penalties after six months.

Where no CGT is due — because the property was your only or main residence and fully covered by Principal Private Residence relief, or the gain was within your AEA — you do not need to file a 60-day report.

HMRC reference: Report and pay CGT on UK property (gov.uk).

Interest on late payment

Unpaid CGT accrues interest at the Bank of England base rate plus 2.5%. As of early 2026, that is approximately 7.25–7.75% per annum. On top of that, HMRC charges 5% surcharges at 30 days, 6 months, and 12 months late. Procrastination is expensive.

4. The Section 104 share pool

When you buy and sell shares in the same company over time, HMRC does not let you cherry-pick which shares you are selling. Instead, your holdings are grouped into a Section 104 pool — a single running total of quantity and allowable cost, averaged on every purchase.

There are two override rules that take priority over the s104 pool (checked in this order):

1. Same-day rule: shares sold are matched first to shares bought on the same day.
2. 30-day rule (bed-and-breakfasting): shares sold are then matched to shares bought within the following 30 days. See Section 5.
3. Anything remaining is matched to the s104 pool.

Full worked example

Mika builds a holding in Acme plc over several years:

S104 pool after all three purchases: 1,000 shares, total cost £5,500. Average cost per share: £5.50.

In November 2026, Mika sells 600 shares at £10.00 each. No same-day or 30-day purchases apply. The disposal is matched to the s104 pool:

Remaining pool: 400 shares, cost £2,200 (£5.50 average, unchanged). The average cost per share never changes when you sell from the pool — it only changes when you buy more shares.

Mika's £2,700 gain is within her £3,000 AEA, so no CGT is due. If she had waited and sold all 1,000 shares at £10, the gain would have been £4,500, of which £1,500 would have been taxable.

5. The 30-day bed-and-breakfasting rule

Before 1998, investors would sell shares one evening and buy them back the next morning to crystallise a gain or loss while maintaining their position — the classic "bed and breakfast" trade. HMRC closed this with the 30-day rule: if you sell shares and buy the same shares back within 30 days, the sale is matched against the repurchase, not the s104 pool. This effectively nullifies the gain or loss you were trying to crystallise.

The rule applies to shares in the same company, held in the same capacity (e.g. as an individual in a GIA). It does not apply across different wrappers or different people — which is exactly what makes Bed & ISA, Bed & Spouse, and Bed & SIPP work.

6. Bed & ISA, Bed & Spouse, Bed & SIPP

The 30-day rule only blocks you from repurchasing in the same name and wrapper. Three legitimate workarounds exist:

Bed & ISA

Sell shares in your General Investment Account (GIA), immediately repurchase the same shares inside your Stocks & Shares ISA. The sale crystallises a gain (or loss) in the GIA; the ISA purchase creates a new, clean base cost — and because gains inside ISAs are tax-free forever, the asset is now permanently sheltered. Many brokers offer a one-click Bed & ISA service that does both legs simultaneously.

Each year you can shelter up to your £20,000 ISA allowance this way. Over time, you are gradually moving assets from taxable to tax-free. The gain on the sale leg may be partially or fully covered by your £3,000 AEA — so each April, the first priority is to use your AEA on Bed & ISA transfers before it expires unused.

Bed & Spouse

Transfers between spouses and civil partners are treated as no gain, no loss for CGT purposes. This means you can transfer an asset with a large gain to your spouse, and they can sell it using their own £3,000 AEA and (potentially) their basic-rate band. This effectively doubles the household's exempt amount and can halve the rate on a large gain.

The transfer itself triggers no CGT. Your spouse inherits your original base cost. They then sell and pay CGT at their own rates. This works for shares, property, and any other chargeable asset.

Bed & SIPP

Sell shares in the GIA and contribute the cash to your SIPP as a pension contribution. The sale crystallises a gain; the pension contribution attracts tax relief at your marginal rate. The gain may be covered by losses or the AEA, and the pension contribution reduces your taxable income — potentially pushing gains out of the 24% band. See Section 14 for more on this interaction.

Unlike Bed & ISA, you cannot repurchase the same specific shares inside the SIPP (SIPPs invest via the platform, so you buy fresh units). And the money is locked until age 57 (from April 2028). But the combination of CGT crystallisation plus pension tax relief can be extraordinarily efficient for higher-rate taxpayers.

7. Bed & ISA calculator

Enter your unrealised gain, annual ISA transfer amount, growth assumption, and marginal CGT rate. The calculator shows how much tax you save each year by systematically sheltering gains inside your ISA, and the cumulative saving over a seven-year horizon.

8. Exemptions & reliefs

Not everything you sell triggers CGT. Here is every meaningful exemption worth knowing about:

Spouse & civil partner transfers

Transfers between spouses or civil partners living together are no gain, no loss. The recipient inherits the transferor's base cost and acquisition date. This is the foundation of Bed & Spouse planning. It also means you cannot crystallise a loss by transferring to your spouse.

ISA & SIPP shelter

Gains realised inside an ISA or a registered pension scheme (SIPP, workplace pension) are completely exempt from CGT. This is why moving assets from a GIA to ISA (Bed & ISA) or SIPP (Bed & SIPP) is so powerful — future growth compounds free of CGT. See the Pensions guide for more on the pension wrapper.

Death — the base-cost uplift

When someone dies, all their chargeable assets receive a base-cost uplift to market value at the date of death. The beneficiaries inherit assets at that new base cost, wiping out any unrealised gain. This is one of the most powerful (and under-appreciated) CGT exemptions. It means that assets held until death never suffer CGT on the accrued gain — though they may be subject to Inheritance Tax instead.

UK government gilts & qualifying corporate bonds

Gains on gilt-edged securities (UK government bonds) are completely exempt from CGT. The same applies to qualifying corporate bonds (QCBs) — bonds denominated in sterling with no provision for conversion into shares or redemption in another currency. This is why gilts are often held directly in a GIA rather than inside an ISA, freeing the ISA allowance for equities where the tax shelter matters more.

Gambling, pools, and lottery winnings

Winnings from gambling (including spread betting), the lottery, pools, and premium bonds are exempt. This is why financial spread betting is CGT-free in the UK — HMRC classifies it as gambling. However, if spread betting becomes your main source of income, HMRC could argue it constitutes a trading activity. For most retail investors, this is not a concern.

Chattels under £6,000

A chattel is a tangible, moveable asset: jewellery, antiques, paintings, classic cars, collectibles. If you sell a chattel for £6,000 or less, any gain is completely exempt. If proceeds exceed £6,000, a special marginal relief formula applies: the gain is capped at 5/3 of the excess over £6,000. So selling a painting for £7,000 with a base cost of £1,000 would give a calculated gain of £6,000, but marginal relief limits the taxable gain to 5/3 × £1,000 = £1,667.

Wasting assets

A wasting asset is one with a predictable useful life of 50 years or less — machinery, plant, boats, some vehicles. Gains on wasting assets are exempt unless they qualified for capital allowances (business use). Most personal possessions that are wasting assets (a car, a boat) are exempt by default. Cars are always exempt from CGT regardless of value — even a £2 million classic Ferrari.

Gifts to charity

If you give (or sell at undervalue) a chargeable asset to a registered charity, the disposal is treated as no gain, no loss. This can be more tax-efficient than selling, paying CGT, and donating cash — especially for highly appreciated shares where the gain would otherwise attract 24% CGT.

EIS & SEIS shares

Shares qualifying for the Enterprise Investment Scheme or Seed EIS are exempt from CGT on disposal, provided the shares were held for at least three years and the original income tax relief was claimed and not withdrawn. If the shares become worthless, you can claim a loss (reduced by the income tax relief already received).

HMRC reference: Capital Gains Tax: what you pay it on (gov.uk).

9. Principal Private Residence relief

If you sell a property that has been your only or main residence throughout ownership, the entire gain is exempt from CGT. This is Principal Private Residence (PPR) relief, and it is the reason most UK homeowners never pay CGT on their house sale.

Partial relief

If the property was not your main residence for the entire period, you get partial PPR. The gain is time-apportioned: the proportion covered by actual occupation (plus certain deemed periods) is exempt, and the remainder is taxable.

The final period exemption

Regardless of whether you were living in the property at the time of sale, the last nine months of ownership are always treated as occupied. This was reduced from 18 months in April 2020. The final period exemption means you can move out of a property, buy a new home, and have up to nine months to sell the old one without any CGT on the final period.

For disabled persons and those in a care home, the final period exemption remains at 36 months.

Letting relief

If you let out all or part of a property that is or was your main residence, letting relief can exempt an additional portion of the gain. Since April 2020, this only applies if you were in shared occupation with the tenant (i.e. a lodger in your home, not a buy-to-let where you no longer live). The relief is the lowest of: the gain attributable to the let period, the PPR amount, or £40,000.

Gardens and grounds

PPR extends to the garden and grounds up to the "permitted area" of 0.5 hectares (about 1.2 acres), including the site of the house. If the total land area is larger, you can claim a larger area is required for the reasonable enjoyment of the property, but HMRC will scrutinise this closely.

10. Business Asset Disposal Relief

Business Asset Disposal Relief (formerly Entrepreneurs' Relief) gives a reduced CGT rate on qualifying business disposals. For 2026/27, the rate is 18% — up from 14% in 2025/26 and 10% before that. The rate now matches the basic-rate CGT rate, meaning BADR's value lies entirely in ensuring qualifying gains avoid the 24% higher rate.

Qualifying conditions

You must be disposing of one of the following:

• All or part of a sole trade or partnership business you have owned for at least two years ending at the date of disposal (or cessation)
• Shares in your personal company — you must hold at least 5% of ordinary shares and 5% of voting rights, be an officer or employee, and have met these conditions for at least two years before disposal
• Assets used by the business, disposed of within three years of cessation

The £1 million lifetime limit

BADR applies to the first £1 million of qualifying gains over your lifetime, not per transaction. Once you have used £1m of relief, any further qualifying disposals are taxed at the normal 24% rate. The lifetime limit was reduced from £10 million to £1 million in March 2020.

Maximum saving

At 18% rather than 24%, the rate saving is 6 percentage points on up to £1m of qualifying gains. The maximum lifetime CGT saving from BADR is therefore £60,000 (£1m × 6%). Under the old 10% rate with the 20% standard rate, the saving was up to £100,000 — so the relief has become substantially less generous over time.

11. Investors' Relief

Investors' Relief is a lesser-known CGT relief that mirrors BADR's reduced rate but applies to external investors rather than owner-managers. For 2026/27 the rate is 18%, with its own separate £1 million lifetime limit (reduced from £10m for disposals from 30 October 2024 onwards).

Qualifying conditions

• Shares must be newly issued ordinary shares in an unlisted trading company (or holding company of a trading group), subscribed for in cash on or after 17 March 2016
• You must have held them continuously for at least three years from 6 April 2016 (or the date of issue, if later)
• You must not be an officer or employee of the company (or a connected company) at any time from issue to disposal — this is the key distinction from BADR

Investors' Relief is designed for angel investors and similar external backers. The £1m lifetime limit is separate from the £1m BADR limit, so in theory you could have £2m of combined qualifying gains taxed at 18% rather than 24%.

HMRC reference: Investors' Relief (HS308) — gov.uk.

12. Crypto & CGT

HMRC treats cryptocurrency (Bitcoin, Ethereum, and all other tokens) as property, not currency. Every disposal is a potential CGT event. Disposals include selling for fiat, exchanging one token for another, using crypto to pay for goods or services, and giving it away (other than to a spouse).

Same-day, 30-day, and Section 104 pooling

Crypto tokens of the same type are fungible, just like shares. HMRC applies the same matching rules in the same order:

1. Same-day rule: tokens disposed of are matched first against tokens of the same type acquired on the same day.
2. 30-day rule: any remaining disposals are matched against tokens acquired within the following 30 days.
3. S104 pool: everything else is matched against the running average-cost pool for that token type.

Each type of token has its own separate pool. Bitcoin and Ethereum are different pools. Wrapped tokens (e.g. WETH vs ETH) may constitute different pools depending on their nature — HMRC guidance is still evolving here.

DeFi, staking, and airdrops

Staking rewards and mining income are generally treated as miscellaneous income (or trading income if done at scale), taxed via income tax at the point of receipt. The market value at receipt becomes the base cost for any future CGT disposal. Airdrops are income-taxed if received in return for a service; otherwise they may have a nil base cost. Liquidity pool transactions (DeFi swaps) are disposals — each swap is a separate CGT event, which can generate enormous record-keeping requirements.

Record keeping

HMRC expects you to keep records of every transaction: date, type of token, quantity, value in GBP at the time, counterparty (exchange or wallet address), and any fees paid. Most exchanges provide downloadable trade histories. Specialist crypto tax software (Koinly, CoinTracker, CryptoTaxCalculator and others) can reconstruct s104 pools across multiple exchanges and wallets.

13. Capital losses

Capital losses are the mirror image of gains, and they are one of the most under-used planning tools in CGT. If you dispose of an asset for less than you paid for it, the loss can be set against gains in the same tax year or carried forward indefinitely.

Same-year losses

Losses realised in the same tax year as gains are automatically offset against those gains, before the AEA is applied. You must use same-year losses in full, even if this "wastes" part of your AEA. Example: £10,000 gain and £9,000 loss in the same year. Net gain = £1,000, which is within the £3,000 AEA, so no tax is due. But you have "used" £9,000 of losses when only £7,000 was needed (£10,000 − £3,000). You cannot choose to carry forward same-year losses to preserve the AEA.

Carried-forward losses

Losses that exceed the current year's gains can be carried forward to future years indefinitely — there is no time limit. When you use carried-forward losses, you only need to offset enough to bring the net gain down to the AEA. Unlike same-year losses, you can preserve your AEA when using brought-forward losses.

Reporting and the four-year claim deadline

To carry forward a loss, you must report it to HMRC. The deadline is four years from the end of the tax year in which the loss arose. Miss this deadline, and the loss is gone forever. This catches people who do not file Self Assessment in a year when they made a loss but no gain — they assume they do not need to report, and the loss expires unclaimed.

For the 2026/27 tax year, losses must be claimed by 5 April 2031.

Negligible value claims

If an asset has become effectively worthless (a company goes bust, shares are suspended and delisted), you can make a negligible value claim. This treats you as having disposed of and immediately reacquired the asset at its negligible value, crystallising a loss without needing to physically sell the shares. The claim can be backdated up to two years before the claim date, provided the asset was of negligible value at that earlier time.

14. Interaction with income tax planning

Because CGT rates depend on your income tax band, anything that reduces your taxable income can directly lower your CGT rate. This is where CGT planning intersects with the strategies covered in the pensions order-of-operations section.

Pension contributions can convert 24% CGT to 18% CGT

If Toni from our worked example made a £10,000 gross pension contribution (relief at source), her taxable income would drop from £35,000 to £25,000. Her remaining basic-rate band would widen from £15,270 to £25,270, meaning more of her £22,000 net gain sits at 18% instead of 24%.

Without the contribution, Toni pays £4,363.80 in CGT. With a £10,000 pension contribution, her taxable income drops and the remaining basic-rate band becomes £25,270 — enough to cover the entire £22,000 net gain at 18%. CGT: £22,000 × 18% = £3,960. That is a £403.80 CGT saving, on top of the income tax relief she captures on the pension contribution itself.

Salary sacrifice

Salary sacrifice goes further: by reducing your gross salary (and therefore your taxable income) before the gain is stacked on top, more of the gain stays in the 18% band. For someone earning £55,000 who sacrifices £10,000 into pension, their remaining basic-rate band widens by £10,000 — potentially converting £10,000 of a gain from 24% to 18%, saving £600 in CGT alone.

Other income-reducing strategies

Any action that reduces your adjusted net income has the same effect: gift aid donations extend the basic-rate band, trading losses reduce taxable income, and in some cases timing the sale to a tax year with lower income (sabbatical, career break, redundancy) can make a material difference to the effective CGT rate.

15. Expanded FAQ