If you sell an asset for more than you paid for it, you may need to consider capital gains tax. Most taxpayers assume that tax is charged on the entire sale price; however, this is not the case. Capital gains tax is typically charged on the profit or gain made when you sell, transfer, exchange, or otherwise dispose of certain assets. Furthermore, you may be subject to CGT if you are a sole trader or partnership, or if you own shares in a limited company, under specific circumstances.
This guide outlines what is capital gains tax UK, including current rates, allowances, reporting deadlines, and key CGT UK basics to consider before making a disposal.
Whether you’re just starting or already earning online, we’ll guide you with simple, honest advice tailored to your situation so you can focus on what you do best.
What Is Capital Gains Tax UK?
Before diving into how CGT works, you need to understand what is capital gains tax UK. Capital Gains Tax (CGT) is a tax that is imposed on the profit (or “gain”) when you sell or dispose of an asset that has increased in value, rather than the total quantity of money received.
When Do You Pay CGT?
When explaining what is capital gains tax UK, it is important to know which assets can fall within CGT rules. When you dispose of an asset (for example, by selling it), you are subject to Capital Gains Tax on the gain:
- Apart from your car, most personal possessions (like jewellery, art, or antiques) that are worth £6,000 or more
- Property that is not your main home
- Shares that are not included in an ISA or PEP
- Business asset
- Your main home if you have let it out, used it for business
These are also known as chargeable assets.
When Do You Not Pay CGT?
When discussing what is capital gains tax UK, it is important to know when taxpayers do not pay CGT. You do not pay capital gains tax on specific assets, such as gains generated from:
- ISAs or PEPs
- UK government gilts and Premium Bonds
- Lottery, betting, or pool winnings
How Capital Gains Tax Works in the UK?
To understand what is capital gains tax UK, you need to know that CGT is usually based on the gain you make, not the full amount you receive.
How to Calculate CGT?
To determine your taxable gain, subtract the original purchase price, allowable acquisition and disposal costs, and qualifying improvement costs from the sale price.
Can I Offset Losses?
You are only subject to taxation if your overall gains, which are determined after subtracting allowable losses and reliefs, surpass your annual tax-free allowance, which is currently set at £3,000 for individuals.
For the 2026/27 tax year, individuals are required to pay Capital Gains Tax at 18% for taxable gains that are within the available basic rate band. Furthermore, gains that exceed it are taxed at 24%. It is important to verify the appropriate CGT treatment for the asset, the tax year, and the individual’s circumstances, as certain reliefs and special rules can influence the final rate.
What Do You Need To Calculate Your CGT?
Before calculating CGT, the most important step is to understand what is capital gains tax UK is and what you need to calculate CGT. To calculate capital gains tax that is due on investments held outside an ISA or pension, you require the following:
Before calculating CGT, it is important to
- The price of the fund units or shares as purchased
- The sales price of the fund units or shares
- The capital gains tax allowance for this tax year
- Your Income tax band
Who Pays Capital Gains Tax in the UK?
While searching for what is capital gains tax UK, many taxpayers are confused about who pays capital gains tax; that is why it is important to understand it. Capital Gains Tax is payable by private individuals, self-employed sole traders, partners in business partnerships, company owners, trustees, and personal representatives of deceased individuals. Limited companies do not pay Capital Gains Tax. Instead, chargeable gains are generally subject to Corporation Tax. Rather, they are required to pay Corporation Tax on any profit that is generated from the sale of their business assets.
What Are Capital Gains Tax Allowances?
When it comes to understanding what is capital gains tax UK, the most important aspect you need to learn is GCT allowances. UK taxpayers are eligible for a capital gains tax allowance, which is the amount of profit they can earn annually before being subject to tax. The Annual Exempt Amount, also called the tax-free allowance for Capital Gains Tax (CGT). The only portion of your total overall gains that exceeds this allowance is subject to CGT.
How Much is the Capital Gains Tax?
The amount of Capital Gains Tax you are required to pay depends on your income level, asset type, taxable gain, and any available allowances or reliefs. This is an important part of understanding what is capital gains tax UK.
When you sell your business or dispose of a business asset, you must calculate your gain to determine whether it is subject to Capital Gains Tax. You are not required to pay capital gains tax (CGT) on any gains in a tax year that fall within the Annual Exempt Amount, which is your tax-free allowance for CGT. The tax-free allowance for the 2026/27 tax year is £3,000 (or £1,500 for trusts).
- Basic Rate Taxpayer:
If you are a basic-rate taxpayer and your gains fall within the basic Income Tax band, you need to pay the following:
- 18% capital gains tax (CGT) on gains from chargeable assets (excluding residential property and carried interest)
- 18% capital gains tax (CGT) on residential property gains
- Higher and Additional Rate Taxpayer:
If you are a higher-rate or additional-rate taxpayer, or if some or all of your gains exceed the base Income Tax band, you need to pay the following:
- Gains from chargeable assets (excluding residential property and carried interest) are subject to a 24% capital gains tax (CGT).
- 24% capital gains tax (CGT) on residential property gains
How Capital Gains Tax Rules Apply to Gifts?
To better understand what is capital gains tax UK you need to know about special rules that apply to gifts. There is no need to pay capital gains tax (CGT) on a business asset that you give away to charity. However, the disposal may be subject to CGT if you sell the asset (such as land, property, or shares) to a charity for more than you paid for it but less than its market value.
Most transfers of assets between spouses or civil partners are treated as taking place on a no-gain/no-loss basis, provided certain conditions are met.
- You are either separated and did not live together during that specific tax year
- You give them the goods to sell through their own business.
How to Report and Pay Capital Gains Tax?
When discussing what is capital gains tax UK, it is important to understand the reporting and payment requirements for CGT.
-
UK Property Disposal Reporting
If you are a UK resident, any disposal of UK residential property that results in a CGT liability must be reported to HMRC and the tax paid within 60 days of the completion date.
-
Self Assessment Reporting
Capital gains from shares, crypto, business assets, or personal possessions must be reported. By filing the SA108 Capital Gains Summary or using the Real Time Capital Gains Tax service, this is done through a Self Assessment tax return.
Payment Deadlines for Reporting
The payment and report deadline for UK residential property disposals where CGT is due is usually 60 days from the date of completion. The deadline for reporting other gains through HMRC online Capital Gains Tax service is 31 December after the tax year of the gain, with payment due by 31 January.
What Are Tax Reliefs on CGT?
Tax relief on CGT can reduce the amount of tax you owe in specific circumstances, and it is an important part of understanding what is capital gains tax UK. If you are eligible for tax relief, you may also be able to reduce or delay your Capital Gains Tax liabilities on business assets, such as:
Business Asset Disposal Relief
In the 2026/2027 tax year, you may be eligible to pay a reduced rate of 18% Capital Gains Tax on any gains you make on qualifying business assets. This applies to you if you sell all or a portion of your business. Business Asset Disposal Relief (BADR) is available to:
- Sole trader
- Self-employed partners in a business partnership
- Shareholders of a personal company
- Trustees selling assets held in a trust
To be eligible for BADR as a sole trader or partner, the business must have been owned for a minimum of two years up to the date on which you sell the business.
Business Assets Rollover Relief
You can delay the payment of the CGT that you owe until you dispose of the new assets if you dispose of a business asset and use all or a portion of the gains to replace it or purchase other business assets. To qualify for Business Asset Rollover Relief, the new assets must be purchased within 3 years of the old ones being disposed of (or up to 1 year before).
Gift Holdovers Relief
While learning what is capital gains tax UK, you must understand that gift hold-over relief can help reduce the amount of tax you owe. Gift Hold-Over Relief may be available if you donate business assets (including certain categories of shares) or sell them for less than their true value. If you are eligible, you will not be subject to Capital Gains Tax on the disposal. Rather, the recipient will be subject to CGT if they subsequently dispose of those assets.
Private Residence Relief
If you sell or dispose of your primary residence, Private Residence Relief is automatically applied.
The Bottom Line
Before selling, gifting, or transferring an asset, it is beneficial to understand what is capital gains tax UK. The amount of CGT that is due depends on your income, gain, available allowance, losses, and any reliefs that you may be eligible for. However, it is not always due. By checking your position earlier, you can prevent unexpected tax liabilities and make more informed decisions before disposal.
Avoid last-minute surprises by seeing your costs upfront, so you can plan better, stay in control, and make smarter financial decisions.
Get Expert Support With Capital Gains Tax
If you are uncertain about what is capital gains tax UK and how CGT applies to your property, shares, business assets, or other disposals, our accountants can help you. At Influencers accountants, we help you calculate the gain, verify the availability of allowances and reliefs, and calculate your gain, prepare the required reports, and ensure your Capital Gains Tax obligations are met accurately and on time.
Disclaimer: The information in “What Is Capital Gains Tax UK Explained: A Complete UK Guide” is provided for general guidance only and does not constitute tax, legal, or financial advice. Capital Gains Tax rules, rates, and reliefs vary depending on your individual circumstances. Always seek advice from a qualified accountant before making financial decisions.
