Capital Gains Tax (CGT) is a tax on the profit when you sell an asset that has increased in value. CGT applies to the gain (profit), not the total sale proceeds. Depending on your personal income tax band, the kind of asset, and the length of time you have owned it, there are several regulations and rates that apply in the UK. This article will use data from official UK government sources to present a concise and understandable explanation of the Capital Gains Tax allowance for the year 2026.
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What is Capital Gains Tax?
When you sell some assets, such real estate, stocks, or other investments, you may be required to pay capital gains tax on your profit. Only the gain you make is subject to taxation; the amount you sell the item for is not. For instance, you would have to pay tax on the £15,000 profit if you purchased a picture for £5,000 and sold it for £20,000.Annual Exempt Amount for Capital Gains Tax (2026/27)
Every individual in the UK has a tax-free capital gains allowance known as the Annual Exempt Amount (AEA). For the 2025/26 tax year, the AEA is £3,000. This means you can make gains of up to £3,000 from selling assets before capital gains tax (CGT) applies. Any profits exceeding this threshold will be subject to CGT based on your tax band.Annual Exempt Amount Table
| Tax Year | Annual Exempt Amount (Individuals & Executors) |
| 2022/23 | £12,300 |
| 2023/24 | £6,000 |
| 2024/25 | £3,000 |
| 2025/26 | £3,000 |
| 2026/27 | £3,000 |
The Annual Exempt Amount has been significantly reduced over recent years, from £12,300 in 2022/23 to just £3,000 in 2024/25. This means for the 2024/25 and 2025/26 tax years, the AEA remains at £3,000. This means you can make gains up to £3,000 from selling assets before CGT applies. Any profits exceeding this threshold will be subject to CGT based on your tax band.
How Much is Capital Gains Tax Rate
Your income tax bracket and the type of asset you sold determine the CGT rate applicable. The rates for the 2024–2025 and 2025–2026 tax years are as follows:
2024/25 Tax Year (6 April 2024 to 29 October 2024):
- Basic Rate Taxpayers: 10% on gains over the AEA.
- Higher and Additional Rate Taxpayers: 20% on gains over the AEA.
- Residential Property Gains: 18% for basic rate taxpayers and 28% for higher/additional rate taxpayers.
Post 29 October 2024 Changes:
- Basic Rate Taxpayers: The rate increased from 10% to 18% for disposals made on or after 30 October 2024.
- Higher Rate Taxpayers: The rate increased from 20% to 24% for disposals made on or after 30 October 2024.
- Residential Property Gains: Rates remain at 18% for basic rate taxpayers and 28% for higher/additional rate taxpayers.
2025/26 Tax Year (6 April 2025 to 5 April 2026):
- Basic Rate Taxpayers: 18% on gains over the AEA.
- Higher and Additional Rate Taxpayers: 24% on gains over the AEA.
- Residential Property Gains: 18% for basic rate taxpayers and 28% for higher/additional rate taxpayers.
- Business Asset Disposal Relief: The rate increases from 14% to 18% for disposals made on or after 6 April 2026.
Calculating Your Gain
To calculate your gain, subtract the purchase price (plus any allowable expenses) from the sale price. Allowable expenses can include costs such as estate agent fees, solicitor’s fees, and costs of improvements.
Example: If you bought a house for £200,000 and sold it for £250,000, your gain would be £50,000. If you incurred £5,000 in allowable expenses, your taxable gain would be £45,000.
Use our Capital Gains Tax calculator to estimate your CGT for the 2026/27 tax year. Check rates, allowances, and how much tax you may owe in the UK.
Capital Gains Tax Calculator
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How to Report and Pay CGT
If you have to pay Capital Gains Tax, you need to report your gains to HM Revenue and Customs (HMRC). You can do this by completing a Self Assessment tax return. Alternatively, you can use HMRC’s ‘real-time’ Capital Gains Tax service to report gains from property sales within 60 days of the sale.
Exemptions and Reliefs
There are certain exemptions and reliefs available that can reduce your Capital Gains Tax bill. Some of the main ones include:
- Principal Private Residence Relief: If the asset you sold is your main home, you may not have to pay any CGT on the gain.
- Entrepreneurs’ Relief: This can reduce the amount of CGT you pay if you are selling a business.
- Gift Hold-Over Relief: If you give away a business asset, you may be able to defer the CGT until the recipient sells the asset.
Source – HMRC
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