How Much Is Capital Gains Tax? 2026 UK Guide To Rates, Property Rules, And New Allowances
Understanding how much is capital gains tax in the UK is essential for anyone selling an asset that has increased in value, as the rates and allowances have undergone significant shifts heading into 2026.
Capital Gains Tax (CGT) is not a tax on the total amount of money you receive from a sale, but rather a levy on the gain or profit made between the time you acquired the asset and the time you disposed of it.
For the 2026/27 tax year, Capital Gains Tax is charged at 18% for basic-rate taxpayers, and 24% for higher-rate taxpayers, and these rates now apply equally to residential property, shares, crypto and other chargeable assets.
Most individuals can use a £3,000 annual exempt amount to reduce their taxable gain before either rate is applied.
Key Takeaway
- In the 2026/27 tax year, UK Capital Gains Tax is charged at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers on all chargeable assets.
- The tax-free Annual Exempt Amount for 2026/27 remains £3,000 per person, down from £12,300 just a few years ago, and cannot be carried forward.
- Selling a UK residential property that is not your main home must be reported and paid to HMRC within 60 days of completion, or penalties apply.
- Business Asset Disposal Relief rose to an 18% flat rate from 6 April 2026, up from 14%, on qualifying gains up to a £1 million lifetime limit.
What is Capital Gains Tax and how does it work?
Capital Gains Tax is a government levy on the profit you realise when you sell, gift, or exchange an asset. It applies to chargeable assets, which include most personal possessions worth £6,000 or more (excluding cars), shares not held in an ISA, and property that isn’t your main home.
In practice, the tax is only triggered upon disposal, meaning the moment the legal ownership changes.
Are personal items like cars and property included?
A common area of confusion involves wasting assets. Generally, private motor cars, including vintage or classic cars, are exempt from CGT because they are expected to have a predictable life of less than 50 years.
While vehicle sales are generally exempt from this specific tax, motorists should still remain mindful of the new car tax rates 2025, which govern annual VED costs. By contrast, residential property remains the most frequent trigger for significant CGT liabilities.
While your main home is usually exempt under Private Residence Relief, any second home, buy-to-let, or inherited property is fully taxable.
Moving out doesn’t automatically end this exemption. HMRC treats certain periods away from the property as if you were still living there, so the gain built up during those periods can still qualify for relief:
- The final 9 months of ownership always count as if you lived there, even if you’d already moved out.
- Up to 3 years of absence for any reason is covered, provided you lived in the property before and after.
- Any period working abroad is covered in full, as long as you move back in afterwards.
- Up to 4 years of absence for a UK job elsewhere is covered on the same condition.
There is no separate six year rule in UK Capital Gains Tax, that figure comes from Australian tax law and doesn’t apply to a UK property.
| Asset Category | CGT Status | Typical Rate (Higher Rate) |
|---|---|---|
| Main Residence | Usually Exempt | 0% |
| Investment Property | Taxable | 24% |
| Private Cars | Exempt | N/A |
| Shares (Non-ISA) | Taxable | 24% |
| Cryptoassets | Taxable | 24% |
The Origins of CGT: Who introduced it and when?
Capital Gains Tax is a relatively modern addition to the UK’s fiscal landscape. It was introduced by the Chancellor of the Exchequer, James Callaghan, in 1965. Before this, individuals could often avoid high Income Tax rates by converting their regular earnings into capital profits, which were then untaxed.
The introduction of CGT was a landmark move to ensure horizontal equity in the tax system. By taxing capital profits, the government ensured that those who made money through asset appreciation contributed to the public purse in a similar way to those who earned a salary.
Since 1965, the rules have evolved from Taper Relief and Indexation Allowance to the simplified, rate-based system we use today.
Who is required to pay Capital Gains Tax in the UK?
You are liable for CGT if you are a UK resident for tax purposes and make a gain on a worldwide asset. This includes individuals, partners in a business, and trustees.
For expats or non-residents, the rules are stricter; you typically only pay UK CGT on UK-based immovable property (land and buildings) even if you live abroad.
Two further rules catch out UK expats and returning residents. If you become non-UK resident and then return within five complete UK tax years, HMRC’s temporary non-residence rule can bring gains realised while you were abroad back into charge in the tax year you return.
Separately, non-residents selling shares in a company where 75% or more of its value comes from UK land, a UK property-rich company, are treated as making an indirect disposal and must report it to HMRC, generally within 60 days.
Do senior citizens and retirees have to pay?
There is no age exemption for Capital Gains Tax. Whether you are 18 or 80, if you sell an asset for a profit above your allowance, you must pay.
A common pattern we see is retirees selling a long-held holiday home or a portfolio of shares to fund their retirement; in these cases, the gain is often substantial because the base cost (the original purchase price) was so low decades ago.
- Individuals: Pay based on their income tax band.
- Trustees: Pay at the flat rate of 24%.
- Business Owners: May qualify for the 18% BADR rate (up from 14% in the previous year).
- Exempt Persons: If your total gains for the year are below £3,000, you are exempt and do not need to report the gain unless you are already registered for Self Assessment.
How much is capital gains tax in 2026/27?
The rate of tax you pay is determined by your total annual taxable income. HMRC calculates your liability by layering your capital gains on top of your earnings, which can often push you into a higher tax bracket.
To find your rate, you must first calculate your taxable income (after the Personal Allowance) and then add your capital gain on top.
The 2026 Business Asset Disposal Relief (BADR) shift
For business owners, 2026 marks a significant transition. Previously, BADR (formerly Entrepreneurs’ Relief) allowed a flat 10% rate. As of 2026, this rate has been adjusted to move closer to standard rates, making it vital for sellers to time their exit carefully.
BADR is capped at a £1 million lifetime limit of qualifying gains, and that limit applies across all your BADR claims over your lifetime, not per sale. Once you’ve used the full £1 million, further qualifying gains are taxed at the standard 18%/24% rates instead.
When reviewing decisions made by SME owners, those who sold before the 2025/26 threshold often saved thousands compared to those selling in the current 2026/27 window.
How to calculate your Capital Gains Tax liability?
Calculating your bill correctly is the only way to ensure you don’t overpay HMRC. Many people forget to include acquisition costs or improvement costs, which can significantly lower the taxable profit.
- Calculate the Disposal Value: The price you sold the asset for (or market value if gifted).
- Determine the Base Cost: What you originally paid for the asset.
- Deduct Allowable Expenses: Include solicitor fees, estate agent commissions, and Stamp Duty paid during purchase.
- Deduct Capital Improvements: For property, this includes extensions or new roofs (not general repairs like painting).
- Identify the Net Gain: Disposal Value – (Base Cost + Expenses + Improvements).
- Subtract the Allowance: Apply your £3,000 annual exempt amount.
- Add to Income: Place this gain on top of your salary to see which tax band you hit.
- Apply the Rate: Multiply the remaining gain by 18% or 24%, or by the 18% flat Business Asset Disposal Relief rate if the disposal qualifies, up to its £1 million lifetime limit.
Understanding the 2026 Allowances and Exemptions
The most significant change in recent years has been the reduction of the Annual Exempt Amount. Previously set as high as £12,300, it has been cut to just £3,000 for the 2026 tax year. This means more small-time investors are being pulled into the tax net than ever before.
The Death Uplift and Inherited Assets
One critical area of tax planning that is frequently overlooked is the treatment of inherited assets. If you inherit a house or shares, you do not pay CGT at the moment of inheritance (though Inheritance Tax may apply).
It is important to understand when do you pay inheritance tax in these scenarios, as the thresholds and reporting windows for estates are entirely separate from capital gains rules.
Instead, your base cost is reset to the market value of the asset on the date the person died.
This is known as the Death Uplift. If you sell the asset immediately for its probate value, your CGT bill is often £0.
How to pay Capital Gains Tax and avoid fines
HMRC provides two distinct routes for payment depending on what you sold. If you miss these windows, the interest charges can mount quickly.
Where and when to pay
- Residential Property: You must report and pay within 60 days of completion using the Capital Gains Tax on UK Property online service.
- Other Assets (Shares, Crypto, Art): These are reported via your annual Self Assessment tax return. For these assets, the deadline for reporting and payment falls on 31st January following the date when does the tax year end for the period in which your disposal took place.
| Penalty Type | Trigger Point | Cost |
|---|---|---|
| Initial Late Filing | 1 day late | £100 |
| 3 Months Late | 90 days late | £10 per day (up to 90 days) |
| 6 Months Late | 180 days late | Greater of £300 or 5% of tax due |
| Late Payment Interest | From the due date | 7.75% (set from 9 January 2026, tracking the Bank of England base rate plus 4%) |
Strategic Tax Planning: How to legally pay less CGT
Effective tax planning isn’t about evasion; it is about utilising HMRC’s own frameworks to ensure you aren’t paying more than is legally required. In practice, tax efficiency is about using the rules as they were intended.
1. Spousal Transfers and Bed and Spouse
Assets can be transferred between spouses or civil partners at nil gain/nil loss. This effectively allows a couple to combine their allowances, giving them a £6,000 tax-free threshold.
If one spouse is a basic-rate taxpayer and the other is a higher-rate taxpayer, transferring the asset to the lower earner before the sale can drop the tax rate from 24% to 18%.
2. The 30-Day Crypto Rule (Bed & Breakfasting)
To prevent wash sales (selling just to use the allowance and immediately rebuying), HMRC has a 30-day rule.
If you sell Bitcoin and buy it back within 30 days, you cannot use the new price as your base cost for the old gain. Understanding this is crucial for crypto investors trying to harvest losses.
3. The Three-Year Window for Separating Couples
Since 6 April 2023, separating spouses and civil partners have had up to three tax years after the tax year they stop living together to transfer assets between themselves on a no gain/no loss basis, so no CGT is triggered on the transfer itself.
Where assets are transferred under a formal court-approved divorce settlement, there’s no time limit on this treatment at all. This remains the current rule for 2026/27, it isn’t a new change for this tax year.
4. Loss Harvesting
If you have dog stocks that have lost value, selling them in the same year as a big winner allows you to subtract the loss from the gain, potentially bringing you under the £3,000 threshold.
5. Using ISAs and Pensions to Shelter Gains
Assets held inside a Stocks and Shares ISA or a pension fall outside CGT entirely, so you can buy and sell within these wrappers without triggering a bill.
Each adult has an annual ISA allowance to use, and moving existing shares into an ISA still counts as a disposal of the original holding (known as Bed and ISA), so any gain on that first sale still needs to fit within your £3,000 allowance or be paid for.
This is one of the most reliable ways to keep future growth out of CGT altogether, rather than just managing the tax on a single sale.
What Does This Mean for SME Owners and Operations?
Capital Gains Tax (CGT) changes directly impact business owners by increasing exit costs, tightening compliance windows, and raising the tax burden on asset disposals up to the £1 million lifetime limit.
- Higher Exit Costs: BADR rising to an 18% flat rate and a reduced £3,000 annual exemption increase the tax burden on entrepreneurs selling businesses or retiring.
- Strict Compliance: Property-rich corporate disposals require strict adherence to tight 60-day reporting windows to avoid HMRC penalties.
- Complex Restructuring: Mergers, acquisitions, and internal asset transfers demand rigorous planning to prevent unexpected tax triggers.
- Strategic Shifts: Increased capital taxation pushes business owners to heavily leverage pensions and corporate reliefs to protect retained gains.
Conclusion
If you’re planning a disposal in 2026/27: confirm how much of the £3,000 allowance you still have this tax year, check whether Private Residence Relief or BADR applies before assuming a gain is taxable, and if you’re selling UK residential property that isn’t your main home, diarise the 60-day HMRC reporting deadline from the completion date, not the day you accept an offer.
Disclaimer: This article is for informational purposes only and does not constitute formal financial, legal, or tax advice; always consult a qualified tax professional or HMRC regarding your specific situation.
FAQ
How do I calculate Capital Gains Tax in the UK?
Work out your gain (sale price minus base cost, costs and improvements), deduct your £3,000 allowance, then add what’s left to your income. The portion within your basic-rate band is taxed at 18%, and the rest at 24%.
Is there a different rate for commercial property?
No. Since the rate changes brought in from 30 October 2024, commercial property is taxed at the same 18% and 24% rates as residential property, shares and most other chargeable assets. The old lower 10%/20% band for non-property assets no longer exists for 2026/27.
What is the 6 year rule for Capital Gains Tax?
There’s no six-year rule in UK Capital Gains Tax, that’s an Australian tax concept. In the UK, Private Residence Relief covers the final 9 months of ownership automatically, plus up to 3 years of absence for any reason if you move back in.
How to avoid Capital Gains Tax in the UK?
You can’t avoid CGT on a taxable gain, but you can legally reduce it: use your £3,000 allowance and your spouse’s, hold assets in an ISA or pension, offset losses against gains, and time disposals across tax years.
How much is Capital Gains Tax in the UK when selling a house?
If it’s your only home, Private Residence Relief usually means no CGT is due. On a second home, buy-to-let or inherited property, the gain above your £3,000 allowance is taxed at 18% or 24%, reported within 60 days of completion.
Does moving out of my home for a few years affect my Capital Gains Tax bill?
Not necessarily. HMRC treats up to 3 years of absence for any reason, and longer periods working away, as if you were still living there, provided it was your main home before and after, and you move back in.
