Updated on 6 April 2026

Capital gains tax

Capital gains tax is a complicated subject, so we provide an introduction only. We do cover the main issues, though, and signpost you to where you may find extra help.

A pad of squared paper with the words 'CAPITAL GAINS' written on it in black ink, wooden scrabble tiles are scattered over the bottom of the paper with the word 'TAX' arranged to spell out 'CAPITAL GAINS TAX'

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Content on this page:

Overview

Capital gains tax (also known as CGT) is a tax charged if you sell, give away, exchange or otherwise dispose of an asset and make a profit or 'gain'.

It is not the amount of money you receive for the asset but the gain you make that is taxed.

Broadly, to calculate the gain, you compare the sale proceeds (or value of the asset at the time it was disposed of) with the original cost of the asset (or value when it was acquired). This is illustrated below:

A stack of coins illustrates how a capital gain is calculated. The whole stack of coins represents the asset’s proceeds or its value on disposal. You take off some of the coins (the cost or the value when the asset was acquired) to find the gain.

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You can find a basic guide to capital gains tax on GOV.UK.

When capital gains tax applies

As noted above, CGT applies when you sell, give away, exchange or otherwise dispose of a capital asset. A capital asset is something that you own such as a house, shares in companies or other possessions.

Some assets are specifically exempt from capital gains tax. We discuss exempt assets below.

If you are a UK resident, you are usually liable to capital gains tax on disposals of assets located anywhere in the world, not just your UK-located assets. There are some exceptions to this. The rules vary depending on whether the asset was sold before or after 6 April 2025. You can read more about these rules:

For disposals up to 5 April 2025 see our page Remittance basis of taxation.
For disposals from 6 April 2025 see our page Foreign income and gains from 6 April 2025.

Non-UK resident disposals

Non-UK resident individuals are not usually liable to UK capital gains tax on the sale of UK assets, but this is subject to some exceptions. See our page Non-residents and capital gains tax.

Gifts and other disposals

You may have to pay capital gains tax when you give an asset as a gift to someone.

The rules are different depending on who you give the gift to and there are special reliefs for gifts of business assets. We do not cover the relief for gifts of business assets here, but you can find information on GOV.UK.

Capital gains tax can also apply if you transfer assets on separation, divorce or dissolution of a civil partnership.

In some cases, you are treated as if you have disposed of an asset. This might happen, for example, if a personal possession, such as an antique, has been destroyed and you have received a capital sum, such as an insurance pay-out, by way of compensation.

Inherited assets

You may have to pay capital gains tax if you sell, give away or exchange an asset you inherited from a deceased estate. Where an asset has been inherited, the ‘cost’ for the purposes of calculating the gain will usually be the market value of the asset at the date of death.

Exempt assets

As already mentioned, some assets are specifically exempt from capital gains tax. Some of the most common examples are:

private motor cars, including vintage cars
gifts to UK registered charities
some government securities
prizes and betting winnings
cash
stocks and shares held in an ISA
foreign currency held for your own use
sales that are otherwise taxed as trading or miscellaneous income

The disposal of your main home is often free of capital gains tax, but this is not always the case. The capital gains tax relief that can be applied on disposal of your main home does not apply to second homes or properties which are rented out, though part of those gains might qualify for relief if the property has previously been your only or main residence. You can read more about the relief on our page Selling your home.

If you sell or give away personal belongings (‘chattels’) then there will be no capital gains tax if your share of the proceeds or value when given away is less than £6,000. See our separate guidance for more information.

Calculating gains

You normally work out your gain by taking the proceeds (or in some cases, the market value on the date of disposal) and then deducting all of the following:

original cost (or in some cases, market value when acquired)
incidental costs of purchase
costs incurred in improving the asset
incidental costs of sale

This then gives you the chargeable gain.

Proceeds

Your proceeds will usually be the amount you received for the asset on sale. However, if you give away an asset, or sell an asset for less than what it is worth, HMRC will usually treat you as having sold it for what it is worth (that is, the market value). You can read more about this on our page Capital gains tax on gifts.

Original cost

In terms of costs, if you bought the asset, you would normally use the actual amount paid for the asset as your ‘original cost’. However, there are some exceptions.

If you are selling an asset you owned at 31 March 1982, you use the market value as it was on 31 March 1982 – the amount you could have sold it for on the open market at that date – instead of your original cost.
The ‘cost’ for capital gains tax purposes might also be different if the asset was received as a gift. See our page Capital gains tax on gifts for more information.
The cost for capital gains tax purposes may be different if it is a non-UK asset and you claimed the remittance basis prior to 5 April 2025. See our page on the Remittance basis of taxation for more information.

Improvement costs

When you improve or add to your asset, you can deduct this cost in the calculation (this will reduce the gain). You can only include improvements, for example, an extension to a house, and not repairs.

Any improvements made to the asset must be reflective in the state of the asset upon its disposal to be allowable as a deduction. For example, if you were to add an extension on to a house, this extension must still be standing at the date of disposal for the costs to be an allowable deduction. If you were to knock down the extension, so that the house was put back to its original state, the costs of the original extension will not be an allowable deduction upon the disposal of the property.

Costs of purchase and sale

Similarly, you can deduct the incidental costs of buying and selling in the calculation. Typical costs include legal expenses and estate agents' fees for property, and broker's commission on the purchase and sale of shares.

We discuss these elements further under Capital gains tax reporting and Capital gains tax record-keeping.

Example – calculation of a chargeable gain

Neil bought a holiday house in March 1979 for £10,000. Neil already had another home of his own. By 31 March 1982 the value of the holiday house had increased to £25,000.

In July 2026, Neil sold the holiday house for £250,000. He had legal costs of £1,000 on the purchase of the house and £7,000 legal and estate agent costs on the sale. Neil had improved the house by building an extension costing £15,000 in May 2001.

Neil’s gain is calculated as follows:

	£	£
Proceeds		250,000
Less:
31 March 1982 value	25,000
Cost of extension	15,000
Legal expenses on purchase	1,000
Legal expenses on sale	7,000
Total deductions		- 48,000
Chargeable gain		202,000

If the extension had been carried out prior to 31 March 1982, then the cost of it would be ignored as it would be reflected in the 31 March 1982 value.

Part disposals

Where you dispose of only part of an asset (other than shares – see our separate guidance), you work out your cost by taking your sale proceeds and dividing them by the total of sale proceeds and the market value of the unsold part. This is then multiplied by your overall cost like this:

Cost of the part disposed of = A x B/C, where

A = overall cost

B = sale proceeds

C = sale proceeds added to the market value of the unsold part.

Example – part disposal

Razvan owns a house which he rents out. The house cost him £160,000. A neighbour offers to buy part of the garden for £15,000. The value of the house with the smaller garden is £155,000.

When calculating the gain on selling part of the garden, Razvan’s calculation of the cost he can use is as follows:

Cost of the part disposed of = £160,000 [overall cost] x £15,000 [sale proceeds] divided by (£15,000 [sale proceeds] + £155,000 [value of the house with the smaller garden])

So, the cost of the part disposed of is £160,000 x £15,000 / £170,000 = £14,117

Small part disposals of land

If you sell part of a holding of land for £20,000 or less and the proceeds are not more than 20% (1/5th) of the value of the whole piece of land, you can elect not to have made a disposal; but the amount of proceeds you receive is taken off your cost which is used to calculate any future disposal.

You cannot make the election if you have other disposals of land in the same year and the total of proceeds for all disposals is more than £20,000.

See HMRC’s capital gains manual CG71870 on GOV.UK for more information.

Example – small part disposal of land

Jenny sells 1 acre of land for £5,000 which is part of a 5-acre field. The other 4 acres are worth £35,000 at the time she makes the disposal, as they are more likely to have development value in future than the acre just sold.

Jenny paid £18,000 for the whole 5 acres, 10 years ago.

In working out her capital gain on disposal of the 1 acre, she will deduct a cost figure calculated as A x B/C where:

A = £18,000 (entire cost)

B = £5,000 (sale proceeds)

C = £5,000 (sale proceeds) + £35,000 (value of part retained) = £40,000

£18,000 x £5,000/£40,000 = £2,250.

So, without taking anything else into account, Jenny's gain on the 1-acre sale will be her proceeds of £5,000, less a cost of £2,250 = £2,750.

Alternatively, provided Jenny had not made total proceeds on sales of land and property of more than £20,000 in the tax year, she could decide to simply deduct the sales proceeds of £5,000 from the cost price, leaving her with a base cost of £13,000 to be used against any future disposals. This is using the relief for small part disposals of land.

However, if Jenny had made no other capital gains in the same tax year, she would not want to use the small part disposals of land rules, as the £2,750 gain would fall within her annual capital gains exempt amount – which we discuss below. This would mean she would keep a higher base cost to set against any future disposal of the remaining 4 acres, possibly minimising a future capital gains tax liability.

The annual exempt amount

Each tax year, most individuals who are resident in the UK are allowed to make a certain amount of capital gains before they have to pay capital gains tax. This is because they are entitled to an annual tax-free allowance, called the annual exempt amount (also known as AEA). It is also sometimes referred to as the annual exemption.

The Annual exempt amount has reduced in recent years:

Tax year	Annual exempt amount
From 2024/25 onwards	£3,000
2023/24	£6,000
2022/23	£12,300

Any unused annual exempt amount cannot be carried forward or back. Each spouse or civil partner gets their own annual exempt amount.

If you have gains from more than one disposal in a tax year and the gains are charged to capital gains tax at different rates, you can choose which gain to set the annual exempt amount against to minimise your capital gains tax liability. This can be done by deducting the annual exempt amount from the gain(s) that are charged at the highest rate of capital gains tax.

Note: If you have capital losses, either from disposals made in the same year or losses brought forward from an earlier tax year, you can also set them against your capital gains in the most beneficial way to minimise your capital gains tax liability. You can read more about this in our guidance on capital losses.

Up until the 2024/25 tax year, individuals who were resident in the UK, but not domiciled here, and who used the remittance basis of taxation (other than in the case where the remittance basis applied automatically because unremitted foreign income and gains were less than £2,000) were not entitled to an annual exempt amount.

The domicile and remittance rules changed significantly from 2025/26. You can read more about these new changes on our page Foreign income and gains from 6 April 2025. Note that the new changes can potentially affect the availability of the annual exempt amount for any ‘new resident’ where a claim is made for relief under the foreign income and gains regime.

Individuals who are non-resident who may be liable to capital gains tax on the disposal of UK land and property are entitled to an annual exempt amount.

Rates of capital gains tax

For disposals in 2025/26 and 2026/27 the main rate of capital gains tax is 18% for basic rate taxpayers. For higher or additional rate taxpayers, the rate is 24%. If you are normally a basic-rate taxpayer but when you add the gain to your taxable income you are pushed into the higher-rate band, then you will pay some capital gains tax at both rates.

Note that there are some exceptions to the rates quoted above, such as where the gain relates to carried interest or where the disposal qualifies for business asset disposal relief, but we do not cover these here. You can read more on GOV.UK.

Welsh and Scottish taxpayers

If you live in Scotland and are a Scottish taxpayer, or in Wales and are a Welsh taxpayer, the same rules as explained above apply to you. You must consider your total income and gains in relation to the UK rates and bands to work out your capital gains tax, even if you pay income tax at the Scottish or Welsh rates and bands on your salary, self-employed profits, rental income or pension.

Example – Scottish taxpayer

Benny’s taxable income for 2025/26, after all allowable deductions and the personal allowance, is £24,500. Benny pays Scottish income tax according to the Scottish rates and bands on this amount.

In September 2025, Benny sells an asset, making a gain of £26,200. Benny has no allowable losses to set against these gains, and the annual exempt amount for 2025/26 is £3,000.

When looking at his gain of £26,200, Benny must use the UK rates and bands. So, Benny’s taxable income is £13,200 less than the upper limit of the UK basic rate band (£37,700 - £24,500).

Benny sets the annual exempt amount against the gain leaving £23,200 taxable (£26,200 - £3,000).

The first £13,200 of the £23,200 gain is taxed at 18% and the remaining £10,000 is taxed at 24%.

His capital gains tax liability as a Scottish taxpayer is therefore no different than if he were paying tax in any other part of the UK (such as in the example of Hasan, above), even though his income tax liability is different (being calculated at the Scottish income tax rates).

2024/25 capital gains tax rates

Capital gains tax rates usually apply consistently for a whole tax year. However, in the 2024/25 tax year there was a change in capital gains tax rates for certain assets part way through the tax year. We have information about the special rules that applied for disposals in the 2024/25 year in our separate guidance.

Jointly owned assets

Each of you is usually liable to tax on your half of any gain arising, assuming the asset is owned equally. If it is not, you are each assessed to tax based on your share of the asset. You can read more about jointly owned property generally on our page Joint income from property.

Date of disposal

The date of disposal for capital gains tax is usually the date that you enter into an unconditional contract.

This means that for property, this is the date that contracts are exchanged and not the date of completion when possession of the property is actually taken.

However, note that there is a 60-day window for reporting any capital gains tax due on disposals of UK residential property (or, if you are non-resident, for reporting all disposals of UK land or property). This begins from the date of completion.

For shares, it is the date the bargain actually took place and not the date of the contract note or the date of settlement.

If, instead, you enter a conditional contract, the relevant date is the date when the conditions are satisfied. Let’s say, for example, someone agreed to buy a house that you own on the condition that the broken-down central heating boiler is replaced. The terms of that work might be set out in an agreed contract. The disposal date for the house for capital gains tax purposes would be when the work was agreed to have been completed to the terms of the contract, not the date the contract was agreed.

If the disposal took place in 2024/25, please see our separate guidance, as there were some special rules that might have an impact on the rate of capital gains tax payable where an contract was entered into on or before 29 October 2024, but did not complete until on or after 30 October 2024.

Delayed or deferred sale proceeds

When you sell an asset, sometimes you receive only part of the money at the date of sale. You may receive further amounts later and some may be dependent on future events. This is called deferred consideration.

Depending on the type of deferred consideration involved, you may need to take it into account immediately when working out your gain or loss for the disposal even though you do not receive it until sometime later.

Generally, if you know the amount of money that you will be receiving, even if it is not payable until a later time, then you include it when calculating the gain or loss.

For example, if the deferred amount consists of an immediate payment followed by a number of instalments, the figure of total proceeds is known in the year of disposal and should be included in your capital gains tax computation even though the actual money will not be received until later.

We are not going to look here at the situation where the amount of the deferred payment is not known as this is more complicated and may require a valuation of the deferred amounts.

Where the disposal proceeds for an asset are payable to you by instalments, you may, in certain circumstances, ask HMRC if you can pay any capital gains tax due by instalments (in recognition that you may not have the money to pay the capital gains tax otherwise).

This relief is available where the instalments, as set out in the contract for sale of the asset:

begin no earlier than the date of disposal of the asset,
extend over a period exceeding 18 months, and
continue beyond the date on which the tax would otherwise be due and payable.

HMRC guidance states that such an application must be made in writing to them. See their capital gains manual CG14910 and self assessment manual SAM80072 on GOV.UK.

Further information

You can find a collection of information on capital gains tax on GOV.UK.

For HMRC’s detailed and technical capital gains tax information see the capital gains tax manual on GOV.UK.

You may need professional advice when disposing of assets, as capital gains tax can be complicated. Other taxes, such as stamp duty, stamp duty land tax (and similar taxes in the devolved parts of the UK) might also apply on the transfer of property. Giving assets away can also haveinheritance tax consequences. Our Getting help pages give guidance on finding a tax adviser.