How capital gains tax works
Capital Gains Tax (CGT) is charged on the profit when you sell or dispose of an asset that has gone up in value — shares, second homes, rental properties, and most other investments. You only pay CGT on your chargeable gain: the sale proceeds minus the original cost and allowable expenses such as broker fees, legal fees and Stamp Duty.
Each individual has a £3,000 annual exempt amount for 2026/27. The first £3,000 of gains in a tax year are tax-free; anything above that is taxed at 18% or 24%, depending on how much basic-rate income-tax band you have left.
2026/27 CGT rates
| Rate | When it applies |
|---|---|
| 18% | Gains that fall within your unused basic-rate band |
| 24% | Gains above the basic-rate band (higher / additional rate taxpayers) |
| 18% flat | Business Asset Disposal Relief — qualifying business disposals, £1m lifetime limit |
From 6 April 2026 the same 18% / 24% rates apply to residential property and other assets. The old 10% / 20% rates were replaced from 30 October 2024. GOV.UK — Capital Gains Tax rates and allowances · 2026/27
How the 18% and 24% rates are decided
Your other taxable income uses up part of your basic-rate band (£37,700 for 2026/27). Any basic-rate band that remains is where your gains are taxed at 18%; gains above that are taxed at 24%. In practice:
| Your taxable income | Chargeable gain | Taxable gain (after £3,000) | CGT due |
|---|---|---|---|
| £0 | £10,000 | £7,000 | £1,260 |
| £25,000 | £20,000 | £17,000 | £3,318 |
| £60,000 | £20,000 | £17,000 | £4,080 |
The middle row is a typical shares sale: £50,000 proceeds minus £30,000 costs gives a £20,000 gain. After the £3,000 allowance, £17,000 is taxable. With £25,000 of income, your basic-rate band has £12,700 left, so £12,700 is taxed at 18% (£2,286) and the remaining £4,300 at 24% (£1,032) — total £3,318.
Your main home is usually exempt
Under Private Residence Relief, selling your main home is normally free of CGT. The tax applies to second homes, buy-to-let properties, shares, funds and other investments. If you sell a UK residential property, you generally need to report the gain and pay CGT within 60 days of completion.
Business Asset Disposal Relief
Qualifying business disposals — such as selling all or part of your business — are taxed at a flat 18% in 2026/27 (up from 14% in 2025/26), subject to a £1m lifetime limit. For example, a £100,000 qualifying gain would be taxed at 18% after the £3,000 allowance: £97,000 × 18% = £17,460.