What CGT actually is
Capital Gains Tax is a tax on the profit (the "gain") when you sell — or otherwise dispose of — an asset that has risen in value. The tax is charged on the gain, not the proceeds. So if you bought shares for £10,000 and sold them for £15,000, your gain is £5,000 — that is what CGT applies to, not the £15,000.
Several events count as "disposal" for CGT, not just selling. You also have a disposal if you give the asset away (gift), exchange it for another asset, receive insurance proceeds for a destroyed asset, or — in the case of crypto — swap one token for another. The single most-missed CGT trap among casual investors is the "every-crypto-swap-is-a-disposal" rule.
2026/27 CGT rates
| Asset / band | Within basic-rate band | Above basic-rate band |
|---|---|---|
| Most assets (shares, ETFs, crypto, art, second-hand cars, etc.) | 18% | 24% |
| UK residential property | 18% | 24% |
| Carried interest (private equity) | 28% | 32% |
| Business Asset Disposal Relief (£1m lifetime) | 14% | 14% |
| Investors' Relief (£10m lifetime, qualifying conditions) | 14% | 14% |
The 18% / 24% bands unified across all asset types from 30 October 2024 onwards — before that, residential property had its own (higher) rates. Now everything except carried interest, BADR and Investors' Relief uses the same two-band structure. Annual Exempt Amount for 2026/27 is £3,000 per individual, down from £12,300 in 2022/23.
The Annual Exempt Amount — and why it now matters more
The first £3,000 of net taxable gains in any tax year is free of CGT. Net means total gains for the year minus total losses. The AEA is per-person, per-year — it cannot be carried forward, gifted, or transferred. Use it or lose it, every 5 April.
For couples, this is the most-missed planning opportunity in the entire UK tax code: each spouse has their own £3,000 AEA, and inter-spousal asset transfers are exempt from CGT (they happen at the asset's original cost, not its market value). So a couple with £6,000 of gains in a year, all sitting in one spouse's name, will pay tax on £3,000 of it. The same couple sharing the holding 50/50 pays nothing. See the CGT spouse tip for the planning steps.
Calculating the gain
The basic formula is straightforward:
Gain = Disposal proceeds − Allowable cost − Allowable expenses
Net taxable gain = Total gains − Total losses − £3,000 AEA
CGT due = Net taxable gain × applicable rate (18% or 24%)
"Allowable cost" is what you originally paid plus any subsequent capital improvements (e.g. an extension on a property). "Allowable expenses" includes acquisition costs (legal fees, SDLT) and disposal costs (estate-agent fees, legal fees on sale, broker commissions on share sales).
Shares — share-pooling and the 30-day rule
If you've bought shares in the same company in batches over time, HMRC uses a specific accounting method called the "Section 104 holding" or share pool. All shares of the same class in the same company are treated as a single asset with an averaged cost basis.
When you sell, the gain is calculated using the average cost across the pool — not first-in-first-out, not last-in-first-out, just average. Worked example:
- 2020: Bought 100 shares of XYZ at £20 each = £2,000 invested, average cost £20
- 2023: Bought 200 shares of XYZ at £30 each = £6,000 added, pool now £8,000 / 300 shares = £26.67 average
- 2026: Sell 150 shares at £40 each = £6,000 proceeds. Allowable cost of those 150 shares: 150 × £26.67 = £4,000.
- Gain: £6,000 − £4,000 = £2,000. Below the AEA — no CGT due (assuming no other gains).
The "bed and breakfast" 30-day rule
If you sell shares and buy back the same shares within 30 days, HMRC matches the sale against the new purchase rather than against the share pool. This was originally designed to stop investors from artificially crystallising losses or using up the AEA without changing their economic position.
The practical implication: a "bed and ISA" move (sell shares in a GIA, buy them back inside an ISA the next day) does not trigger the 30-day rule because the ISA-wrapped shares are a different class of asset. So the bed-and-ISA pattern remains a valid way to use the AEA each year.
Property — the residence relief story
UK residential property has the same 18% / 24% rates as other assets, but with a critical relief: Private Residence Relief (PRR) exempts the entire gain on your only or main home for the period it was your residence (plus the final 9 months of ownership, even if you've moved out).
For someone who has lived in their home for the entire ownership period, PRR is a 100% exemption — no CGT regardless of the gain. For mixed-use periods (e.g. you let it out for a few years, then moved back in), the gain is apportioned: the residence period gets PRR; the let period is taxable. The property CGT calculator handles the apportionment.
Lettings Relief
If you let the property at any point and continued to live in it during that letting period (so-called "shared occupancy"), Lettings Relief can wipe out up to a further £40,000 of gain. This is the relief that catches landlords who briefly rented a spare room or basement flat. The rules tightened in April 2020 — Lettings Relief now only applies where the owner shared occupancy with the tenant.
The 60-day reporting rule
If you sell a residential property and there's any CGT to pay (i.e. PRR doesn't fully exempt the gain), you must report and pay the CGT within 60 days of completion via HMRC's online Capital Gains Tax UK property service. Missing the deadline triggers immediate £100 penalties; continuing to be late escalates.
This is separate from the annual Self Assessment return. The 60-day return is an interim report; the final reconciliation happens on Self Assessment in the following January.
Crypto — every swap is a disposal
HMRC's stance on crypto is unambiguous: every disposal of one cryptoasset is a CGT event. "Disposal" includes:
- Selling crypto for fiat (e.g. ETH → GBP)
- Swapping one crypto for another (e.g. ETH → USDC, ETH → SOL)
- Spending crypto on goods or services
- Gifting crypto to anyone except a spouse / civil partner
The same Section 104 pool rules apply — you maintain a pool of "average cost" for each token, and any disposal calculates the gain against that pool's average. The 30-day bed-and-breakfast rule applies too, with the same 30-day window.
Many casual crypto users have triggered substantial CGT bills without realising it because each swap on a DEX or centralised exchange is a separate disposal. The crypto tax calculator handles share-pool accounting; for high-volume users, dedicated software like Koinly or Recap UK is essential.
Losses
Capital losses are deductible from gains in the same tax year automatically. Unused losses can be carried forward indefinitely against future gains (but not against income). To carry forward, you must register the loss with HMRC within 4 years of the end of the tax year in which the loss was made — typically by including it on a Self Assessment return.
Losses on shares in a company that has gone bust ("negligible value claim") can be claimed even without a formal disposal — file a negligible value claim with HMRC stating the date the shares became worthless. This is the relevant relief for failed EIS investments not eligible for share loss relief, or for ordinary share holdings where the company has been wound up.
Business Asset Disposal Relief
BADR (formerly "Entrepreneurs' Relief") gives a flat 14% CGT rate on the first £1m of qualifying business sales over a lifetime. From April 2026 the rate rose from 10% to 14%, and is scheduled to rise again to 18% from April 2027 — the relief is being narrowed but not eliminated. Qualifying conditions are strict:
- You must hold at least 5% of the company's ordinary share capital and voting rights for at least 2 years before disposal
- You must be an officer or employee of the company
- The company must be a trading company (or holding company of a trading group)
For owners of small businesses, this is one of the most valuable reliefs available. For passive investors holding small stakes in private companies, it usually doesn't apply because of the 5% / employee tests.
Reliefs that defer or eliminate CGT
- EIS / SEIS reinvestment relief — defers (or partially exempts) CGT on existing gains by reinvesting into qualifying companies. See the EIS / SEIS calculator.
- Holdover relief — defers CGT on certain gifts of business assets or to trusts, transferring the cost basis to the recipient.
- Rollover relief — defers CGT on the disposal of a business asset by reinvesting in a replacement business asset within strict time limits.
- ISA wrapper — assets inside an ISA are entirely exempt from CGT. The annual £20,000 subscription cap means this can't shelter very large gains in any one year, but over decades it shelters dramatic amounts.
- SIPP / pension wrapper — same as ISA: no CGT inside the wrapper.
Reporting and paying
Two routes for declaring and paying CGT:
- UK residential property: 60-day online report via HMRC's CGT UK property service, with payment due at the same time. Reconciled later on Self Assessment.
- Everything else: declared on the annual Self Assessment return, due 31 January following the tax year. Payment of any tax due is also due on 31 January.
You also have to file a Self Assessment if your total disposal proceeds in the year exceed 4 × the AEA (i.e. £12,000 for 2026/27), even if the gain itself is below the AEA. This catches investors with significant turnover but small net gains.
Common mistakes
- Forgetting that ISA bed-and-ISA still uses up the AEA. Selling £15,000 of GIA shares with a £4,000 gain to immediately re-buy them inside an ISA still triggers a £4,000 disposal — using £3,000 of AEA and creating £1,000 of taxable gain.
- Missing the 60-day property reporting deadline. Penalties start at £100 immediately and escalate.
- Not pooling shares correctly. Some investors apply FIFO mentally when HMRC requires Section 104 pool averaging.
- Forgetting that crypto-to-crypto swaps are disposals. A heavy DEX trader can have hundreds of disposals in a year.
- Failing to register losses within 4 years. Losses you didn't claim cannot be used in future years.
- Assuming spouse asset transfers reset the cost basis. They don't — the receiving spouse takes over the original cost.
FAQs
Do I pay CGT on selling my main home?
No, if Private Residence Relief applies for the entire ownership period. Yes, on any portion where it wasn't your only or main home. The final 9 months of ownership always get PRR even if you've moved out earlier.
Can I avoid CGT by gifting an asset to my spouse before selling?
Inter-spousal transfers happen at the original cost (not market value), so no immediate CGT is triggered. The receiving spouse then has the same gain when they sell — but they have their own AEA and may be in a lower tax band. This is the basis of the "spouse split" CGT planning move.
Are gifts to charity exempt from CGT?
Yes — gifts of qualifying assets (shares, property, art) to UK charities are exempt from CGT. The donor can also claim income tax relief on the value of the gift, making in-life charitable giving of appreciated assets very tax-efficient.
What happens to CGT when I die?
Death is not a CGT disposal. The asset's cost basis is "stepped up" to its market value at the date of death — so any pre-death gain disappears. The estate may pay Inheritance Tax instead, depending on the total estate value. For most appreciating assets, dying is the most tax-efficient way to transfer them — the gain is forgiven.
Are options and futures subject to CGT?
Generally yes, although the treatment depends on whether the activity is investment or trading. For typical retail use (covered calls, hedging), CGT applies. Heavy day-trading volumes can be reclassified as trading income (taxed at marginal income tax rates), but that's rare and typically only happens after HMRC enquiry. See the UK options tax guide for nuance.
Related calculators and tools
Property CGT calculator · Shares CGT calculator · Crypto CGT calculator · ISA vs GIA · EIS / SEIS relief · CGT spouse tip · UK tax rates 2026/27