Calculate your
capital gains tax.

What is Capital Gains Tax and who pays it?

Capital Gains Tax applies whenever you dispose of an asset at a profit. Disposal includes selling an asset outright, giving it away, exchanging it for another asset, or receiving compensation for its loss or destruction. CGT applies to a wide range of assets: residential property other than your main home, shares and investment funds held outside an ISA or pension, cryptocurrency, business assets, buy-to-let property, and valuable personal possessions worth over £6,000.

There are important exemptions. Your main residence is sheltered by Private Residence Relief, provided you lived there throughout ownership and it meets HMRC’s conditions. Assets held inside an ISA or pension are entirely free of CGT. Gifts between spouses or civil partners are also CGT-free, a key planning tool, as assets can be transferred to a partner with an unused annual exempt amount or a lower CGT rate before disposal.

The annual exempt amount for 2025/26 is £3,000 per person, dramatically lower than the £12,300 that applied in 2022/23. You must report gains to HMRC even if they are below the £3,000 threshold when your total disposal proceeds across all assets in the year exceed £50,000. This reporting obligation catches many property sellers whose gain is modest but whose sale price is large.

How Capital Gains Tax is calculated in 2025/26

Your gain is calculated by subtracting all allowable costs from your disposal proceeds. Allowable costs include: the original purchase price (or March 1982 market value if acquired before that date), stamp duty land tax paid on purchase, solicitor and surveyor fees on both purchase and sale, estate agent fees on sale, and capital improvement costs, but not routine maintenance or repairs. The resulting figure is your gross gain.

From the gross gain, deduct the £3,000 annual exempt amount to arrive at the taxable gain. Capital losses from the current year must be set against gains first; losses brought forward from prior years are deducted only to reduce the gain to the annual exempt amount; they cannot create an extra exemption. The taxable gain is added to your total income to determine which CGT rate applies. If the combined total stays within the basic rate threshold (£50,270 in 2025/26), the 18% rate applies. Gains above that threshold attract 24%.

Business Asset Disposal Relief (BADR) reduces CGT to 14% on qualifying business disposals including the sale of a trading business, qualifying company shares, and assets lent to your business. BADR applies up to a £1 million lifetime limit. Once that limit is exhausted, any additional qualifying gains are taxed at the standard CGT rates. From April 2026, the BADR rate rises from 14% to 18%, so qualifying disposals completed before 6 April 2026 save 4 percentage points per pound of gain.

How to legally reduce your Capital Gains Tax bill

With rates at 18%/24% and an annual exempt amount of only £3,000, proactive planning is essential for investors and property owners. Several legitimate strategies can meaningfully reduce your CGT exposure without requiring complex arrangements.

Using your annual exempt amount each year is the simplest and most overlooked strategy. The £3,000 exempt amount cannot be carried forward: it is used or lost. Selling assets up to the exempt amount each year resets their base cost and gradually locks in tax-free gains. Combined with a bed-and-ISA strategy (selling shares and immediately repurchasing them inside an ISA), investors can progressively move investments into a CGT-free wrapper while crystallising current gains within the exempt amount.

Common mistakes people make with Capital Gains Tax

CGT is one of the more nuanced areas of UK tax, and errors are common, even among experienced investors. These mistakes range from leaving money on the table through missed deductions to incurring penalties for late reporting.

Forgetting allowable acquisition costs. Many investors calculate CGT on the sale price minus the purchase price alone, missing the full range of deductible costs. Stamp duty paid on purchase, solicitor fees on both purchase and sale, estate agent commission, and structural improvement costs all reduce the taxable gain. On a property bought for £350,000 with £12,000 in stamp duty and £4,000 in legal fees, the allowable cost is £366,000, not £350,000. This difference alone reduces the taxable gain by £16,000.

Not registering capital losses with HMRC. Losses from previous years can be carried forward indefinitely and set against future gains, but only if claimed within four years of the end of the tax year in which the loss occurred. Many investors have qualifying losses sitting unregistered and unused. Every such loss represents tax relief permanently forfeited once the four-year window closes.

Missing the 60-day residential property deadline. For UK residential property, CGT must be reported and paid within 60 days of completion using HMRC’s UK Property Reporting Service, not by the following 31 January. Missing this separate deadline results in interest from day 61 and a £100 late-filing penalty.

Not reporting when proceeds exceed £50,000. Even if your total gains are below the £3,000 annual exempt amount, you must report to HMRC if total disposal proceeds in the year exceed £50,000. This catches the vast majority of property sales, even when the gain is modest relative to the sale price.

Misunderstanding Private Residence Relief. Your main home is sheltered from CGT by PRR, but only for periods of genuine occupation. If you let the property, worked abroad, or used it only partially as your main home, a proportion of the gain becomes taxable. The final nine months of ownership are always exempt, but correctly calculating the exempt fraction for mixed-use periods requires careful record-keeping of occupation dates throughout the ownership period.

Reporting CGT to HMRC: deadlines and requirements

The reporting deadline for CGT depends on the type of asset disposed of. For UK residential property, including buy-to-let, second homes, and inherited property, you must report the disposal and pay any CGT within 60 days of the completion date, using HMRC’s separate UK Property Reporting Service. This applies to all disposals from 27 October 2021 onwards, and must be completed even if you file a Self Assessment return (which must also include the same disposal).

For all other assets (shares, cryptocurrency, business assets, and personal possessions) CGT is reported through your Self Assessment tax return, filed by 31 January following the end of the relevant tax year. If you do not normally file Self Assessment, you must register with HMRC by 5 October following the tax year of the disposal, then complete a return by 31 January.

Interest accrues on late paid CGT from the date payment was due. The current HMRC late payment interest rate exceeds 7%. Penalties for late reporting of property gains can reach 30% of the unpaid tax if HMRC raises an assessment before you report. Reporting accurately and on time is always significantly cheaper than the combined cost of penalties and interest.