Key Takeaway: UK Capital Gains Tax rates are 18% (basic rate) and 24% (higher/additional rate) as of 2024–25. The annual CGT allowance is £3,000 — down from £12,300 in 2022. Use ISAs, spousal transfers, and annual allowance harvesting to legally reduce your CGT bill.
What CGT Applies To
Capital Gains Tax is charged on the profit (gain) you make when you sell or 'dispose of' an asset. It doesn't apply to income — that's Income Tax. It applies specifically to capital gains from assets that have grown in value. Common assets subject to CGT: • Shares and equity investments (outside an ISA or pension) • Second properties (buy-to-let, holiday homes) • Business assets • Cryptocurrency • Valuable personal possessions over £6,000 (art, jewellery, antiques) Assets NOT subject to CGT: • Your main home (Primary Residence Relief) • ISAs and pensions • UK government gilts and Premium Bonds • Cars • Personal possessions under £6,000
The 2026 CGT Rates
Since October 2024, CGT rates for most assets align between residential property and other chargeable assets. Current rates (2026): Basic rate taxpayer (total income within basic rate band): • Residential property: 18% • Other assets (shares, funds, crypto): 18% Higher and additional rate taxpayer: • Residential property: 24% • Other assets (shares, funds, crypto): 24% Your CGT rate depends on your income tax band. If your total income (including the gain) stays within the basic rate band, you pay 18%. If the gain pushes you into the higher rate band, you pay 24% on the portion above the threshold. Annual CGT allowance: £3,000 (frozen through 2027–28) This is dramatically reduced from previous years: £12,300 (2022–23) → £6,000 (2023–24) → £3,000 (2024–25 onward). The reduction means more people now owe CGT on modest gains.
A Worked Example
Priya is a basic rate taxpayer earning £35,000. She sells shares in a general investment account (outside ISA) and realizes a £10,000 gain. Step 1: Apply the annual allowance. Taxable gain = £10,000 − £3,000 = £7,000 Step 2: Determine the rate. Basic rate band for 2026–27 is roughly £50,270 (after personal allowance). Priya's income is £35,000, so she has £15,270 of basic rate band remaining. The £7,000 gain fits within the basic rate band → 18% rate applies. CGT owed = £7,000 × 18% = £1,260 Now consider Raj, a higher rate taxpayer earning £80,000. Same £10,000 gain on shares: Step 1: Apply the annual allowance. Taxable gain = £7,000 Step 2: Rate. Raj's income is above the basic rate band, so the entire gain is taxed at 24%. CGT owed = £7,000 × 24% = £1,680 If the same assets were held inside an ISA, both Priya and Raj would owe £0 in CGT — one of the strongest reasons to use ISAs for equity investing.
Strategies to Reduce CGT Legally
1. Use your ISA allowance. ISAs are completely CGT-free. Any investment held inside an ISA never triggers CGT, no matter how large the gain. This is the simplest and most effective strategy. 2. Utilise the £3,000 annual allowance. Even outside an ISA, you can realize up to £3,000 of gains each tax year without paying CGT. This is 'capital gains harvesting' — sell assets to realise gains tax-free, then rebuy. 3. Spousal transfers. Transfers between spouses (and civil partners) are CGT-free. A higher-rate taxpayer can transfer assets to a lower-rate spouse before selling, saving up to 6 percentage points (18% vs 24%). 4. Harvest losses. If you have losses on some assets, offset them against gains. Losses can be carried forward indefinitely. 5. Bed and ISA. Sell assets outside an ISA, immediately rebuy inside an ISA. The gain may be within your annual allowance, and future growth is CGT-free. 6. Bed and breakfasting rules. If you sell and rebuy the same asset within 30 days, the rule requires you to match the purchase against the sale, nullifying the harvest. Wait 30+ days before repurchasing, or buy in an ISA instead.
Reporting and Payment
Reporting deadlines: • Residential property: Must be reported and paid within 60 days of completion (from 27 October 2021). • All other assets: Reported via Self Assessment by 31 January following the tax year (e.g., 31 January 2027 for the 2025–26 tax year). Reporting thresholds: • If total gains exceed £3,000, you must report • If total proceeds exceed £50,000, you must report even if gains are below £3,000 Payment: • Self Assessment payment is due by 31 January • Payments on account may apply if CGT liability exceeds £1,000 Failure to report and pay on time triggers penalties and interest. For property sales, the 60-day deadline is strict — many sellers miss it and pay fines of £100+.
Frequently Asked Questions
Do I pay CGT on my main home?
Usually no. Primary Residence Relief exempts the main home from CGT if it's been your only or main residence throughout ownership. Complexities arise if you've let it out, used it for business, or have multiple properties. Get professional advice if any of these apply.
Is CGT charged on ISA gains?
No — ISAs are completely CGT-free. This is one of the main reasons to use ISAs for equity investing. Any gain inside an ISA, however large, triggers zero CGT. Over a lifetime, the tax savings can be worth hundreds of thousands of pounds.
How does CGT work for cryptocurrency?
Same as shares. Each crypto disposal (selling, swapping, spending) is a taxable event. The gain is calculated as sale proceeds minus cost basis. Use your £3,000 annual allowance and report via Self Assessment. HMRC has become increasingly active in crypto tax enforcement — keep detailed records.
What if I sell shares and buy them back the same day?
The 30-day rule applies. If you sell and rebuy the same shares within 30 days, the transaction is matched against the repurchase, not the original cost. This 'bed and breakfast' rule prevents tax harvesting through same-day trading. Instead, use a 'Bed and ISA' (sell outside ISA, rebuy inside ISA) or wait 30+ days.
Can I offset capital losses against income?
No — capital losses only offset capital gains. They cannot be used against salary, dividends, or other income. Losses must be reported to HMRC (usually within 4 years) to be usable. Unused losses carry forward indefinitely.
Do I pay CGT if I give shares to my children?
Yes, typically at market value. Gifting assets to children (or anyone other than a spouse/civil partner) is a disposal at market value, triggering CGT on the gain. Some reliefs apply for business assets (Business Asset Disposal Relief). Get advice before gifting.
What's the deadline to report CGT on property sales?
60 days from completion. This is much tighter than the general Self Assessment deadline. Miss it and you face automatic penalties starting at £100. Even if you make no gain, you may still need to report the sale if proceeds exceed 4 times the annual allowance.
How do spousal transfers work for CGT?
Transfers between spouses/civil partners are CGT-free. Assets are transferred at no gain / no loss — meaning no CGT is triggered. The receiving spouse takes on the original cost basis. If the receiving spouse is in a lower tax band, they may pay 18% instead of 24% when they eventually sell.
Bottom Line
UK Capital Gains Tax has become significantly more punitive in recent years — rates have risen to 18%/24%, and the annual allowance has been cut from £12,300 to £3,000. This makes tax-efficient investing more important than ever. Use ISAs as your primary vehicle for equity investing — they're completely CGT-free. Harvest gains within the £3,000 allowance each year. Transfer assets between spouses to optimise tax bands. Harvest losses to offset gains. And for property sales, remember the 60-day reporting deadline. Get the strategy right and CGT becomes a manageable cost rather than a wealth-destroying one.