Capital Gains Tax (CGT) is the tax you pay on any profit (the “gain”) arising from the sale or disposal of an asset that has increased in value. In the UK, Capital Gains Tax applies to a wide range of chargeable assets, including property, shares, business assets and certain personal possessions, and can be applicable to individuals, trustees and, in some cases, non-residents. Companies do not pay CGT; instead, they pay Corporation Tax on their chargeable gains.
Taxpayers must ensure compliance with Capital Gains Tax rules. Failure to accurately calculate and report CGT can lead to penalties and interest charges. Beyond compliance, understanding how CGT works supports effective tax planning, ensuring optimum use of the various exemptions and reliefs that can reduce liability.
This guide explains the fundamentals of Capital Gains Tax in the UK, including when it applies, who is liable, current rates and allowances, how to calculate gains, and which reliefs and exemptions are available. It also provides worked examples, reporting rules such as the 60-day return for residential property disposals, and common mistakes to avoid.
Section A: What is Capital Gains Tax?
Capital Gains Tax (CGT) is a key part of the UK tax system. It is a tax on the profit realised when you dispose of a chargeable asset for more than it cost you. The disposal can include selling, gifting, transferring, or exchanging an asset. Importantly, it is only the gain that is taxable — not the total amount of money received from the disposal.
CGT applies to many asset types, including real estate other than a taxpayer’s main home (where Private Residence Relief may apply), shares and investments, and personal possessions worth over £6,000. As of the 2024/25 tax year, each individual has an annual exempt amount of £3,000, and most trusts have £1,500, below which gains are not taxable. Where multiple trusts are set up by the same settlor, this exemption is shared, with a minimum of £300 per trust.
The tax was first introduced on 6 April 1965 by Chancellor James Callaghan. Since then, the regime has been updated regularly. Previous measures such as indexation allowance and taper relief have been withdrawn, while other reliefs, such as Entrepreneurs’ Relief (now Business Asset Disposal Relief), remain available but on restricted terms. In recent years, government policy has narrowed exemptions, lowered allowances, and tightened deadlines — most notably the 60-day reporting requirement for residential property gains and the reduction of the annual exempt amount from £12,300 in 2022/23 to £3,000 in 2024/25.
Today, Capital Gains Tax rates vary depending on the taxpayer’s income and the type of asset. Gains on most assets are charged at 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers, while gains on residential property and carried interest are taxed at 18% and 24% respectively for disposals on or after 30 October 2024. Reliefs and exemptions, such as Private Residence Relief and Business Asset Disposal Relief, can significantly reduce the amount payable in specific circumstances.
Section B: When is Capital Gains Tax Payable?
Capital Gains Tax liability only arises when specific conditions are met. Not every disposal will lead to a tax charge, but taxpayers must understand the triggering events and who is responsible for paying CGT.
1. Triggering Events
CGT is generally due when you dispose of an asset and realise a gain. “Disposal” has a broad meaning in UK tax law and includes more than just selling an asset. Common triggering events include:
a. Selling an Asset
The most common event is the sale of an asset, such as property, shares, or personal possessions. If the sale price exceeds the purchase price (after allowable costs), the difference is a chargeable gain for Capital Gains Tax purposes.
b. Gifting an Asset
Gifting assets can also create a CGT liability if the asset has increased in value. Exceptions include gifts to a spouse, civil partner, or a registered charity, which are usually exempt.
c. Transferring an Asset
Moving assets into a trust, between businesses, or otherwise transferring ownership may trigger CGT if the asset has appreciated.
d. Exchanging an Asset
Swapping one asset for another, such as trading shares, is treated as a disposal for CGT purposes.
e. Receiving Compensation
Insurance or compensation received for an asset that is lost, destroyed, or damaged may be treated as a disposal and give rise to a chargeable gain.
f. Part-Disposals
Where only part of an asset is sold or transferred, such as a fractional share in property or a portion of a collection, the disposal may create a CGT liability on that part.
2. Who Pays Capital Gains Tax?
a. UK Resident Individuals
UK residents pay CGT on worldwide gains from chargeable assets. This includes disposals of property, shares, business assets, and personal possessions above the annual exempt amount.
b. Non-Resident Individuals
Non-residents are not taxed on worldwide gains but are liable to UK Capital Gains Tax on disposals of UK property and land, including certain interests in property-rich entities. Since April 2019, disposals of UK commercial as well as residential property by non-residents fall within CGT.
c. Non-Domiciled Individuals (Non-Doms)
The remittance basis rules currently allow some non-doms to shelter foreign gains from UK tax if they are not brought into the UK, subject to conditions and charges. From 6 April 2025, however, the government intends to abolish the remittance basis and move to a worldwide “arising” basis for all UK residents. Transitional measures, such as rebasing of foreign assets and temporary repatriation facilities, have been announced but remain subject to final legislation.
d. Trusts
Trustees are liable for CGT when the trust disposes of a chargeable asset. The annual exempt amount is £1,500 for most trusts, shared between trusts created by the same settlor (minimum £300 per trust). Gains above this are taxed at 20% (or 24% for residential property and carried interest).
e. Companies
Companies do not pay Capital Gains Tax. Instead, they pay Corporation Tax on their chargeable gains at the same rate as their taxable profits (currently up to 25%).
f. Charities
Charities are usually exempt from CGT where the gains are applied to charitable purposes. Gains may become taxable if the asset was not used for charitable purposes.
g. Pension Funds
Registered pension schemes are exempt from CGT on their investment gains, ensuring maximum value for beneficiaries.
h. Investment Funds
Investment funds such as unit trusts and open-ended investment companies (OEICs) may be subject to CGT depending on their structure, although investors themselves may face CGT on disposals of fund units or shares.
i. Public Bodies
Public bodies and government entities are generally exempt from CGT. This includes local authorities and similar statutory organisations.
Section C: Types of Assets Subject to Capital Gains Tax
Capital Gains Tax in the UK applies to a wide range of chargeable assets. Understanding which assets are taxable and which are exempt is essential for accurate reporting and effective tax planning.
1. Chargeable Assets
The following types of assets are commonly subject to Capital Gains Tax:
a. Property
Second homes, rental properties, commercial property and land are all chargeable assets for CGT purposes. Disposals of your main home are usually exempt under Private Residence Relief (PRR), provided it has been your principal residence throughout ownership. Partial relief may be available where the property has not always been your main residence.
b. Shares and Investments
Gains on disposals of shares and investments, including stocks, units in investment funds and company shares, are subject to CGT unless held in a tax-advantaged account such as an ISA or pension.
c. Personal Possessions (Chattels)
Personal possessions worth more than £6,000 — known as “chattels” — are within the scope of CGT. This can include antiques, artwork, jewellery and other collectibles. Items valued below £6,000 are exempt.
d. Business Assets
Assets used in a trade, such as commercial premises, plant and machinery, and intellectual property, are subject to CGT when disposed of by individuals or partnerships. Reliefs such as Business Asset Disposal Relief (BADR) may reduce the effective tax rate to 10% on qualifying disposals.
e. Cryptocurrency
Disposals of cryptocurrency, including Bitcoin and Ethereum, are subject to Capital Gains Tax. HMRC treats cryptoassets as property for tax purposes. Gains must be calculated and reported on disposals including sales, exchanges, or using crypto to purchase goods and services.
2. Exemptions from Capital Gains Tax
Some assets and disposals are specifically exempt from Capital Gains Tax. Common exemptions include:
a. Gains Below the Annual Exempt Amount
If your total net gains in a tax year are below the annual exempt amount (£3,000 for individuals, £1,500 for most trusts), no CGT is payable.
b. Transfers to Spouse, Civil Partner or Charity
Transfers between spouses or civil partners are exempt from CGT. Gifts to UK-registered charities are also exempt.
c. Investments in Tax-Advantaged Accounts
Gains on assets held within Individual Savings Accounts (ISAs) and Personal Equity Plans (PEPs) are exempt from CGT. Similarly, gains from UK government gilts and Premium Bonds are not taxable.
d. Gambling and Lottery Winnings
Winnings from betting, the National Lottery, and football pools are exempt from Capital Gains Tax.
Section D: Capital Gains Tax Rates and Allowances
Capital Gains Tax (CGT) rates and allowances are a central part of the UK tax system. They determine how much tax is payable on profits from the sale or disposal of chargeable assets. The amount of CGT due depends on your overall income, the type of asset disposed of, and the reliefs or allowances you can claim.
1. Annual Exempt Amount
Every taxpayer benefits from a tax-free allowance each year, known as the Annual Exempt Amount. For the 2024/25 tax year this is:
- £3,000 for individuals
- £1,500 for most trusts
Where the same settlor has created multiple trusts, the allowance must be shared between them, subject to a minimum of £300 per trust. Gains below these thresholds are not subject to Capital Gains Tax. Taxpayers can further reduce their CGT liability by offsetting allowable losses against gains.
2. Current Capital Gains Tax Rates
The rate at which CGT is charged depends on both the taxpayer’s income tax band and the type of asset being disposed of. Since 30 October 2024, the rates are as follows:
| Taxpayer Type | Income Band | CGT Rate (Most Assets) | CGT Rate (Residential Property & Carried Interest) |
|---|---|---|---|
| Basic Rate Taxpayer | Within basic rate band | 10% | 18% |
| Higher Rate Taxpayer | Above basic rate band | 20% | 24% |
| Additional Rate Taxpayer | Income over £125,140 | 20% | 24% |
Gains from residential property disposals (other than those covered by Private Residence Relief) and carried interest are taxed at higher CGT rates than other assets. Shares, business assets, and personal possessions above the exemption limit are taxed at the standard 10% or 20% rates depending on your income band.
3. Companies and Chargeable Gains
Companies do not pay Capital Gains Tax. Instead, they pay Corporation Tax on their chargeable gains at the same rate as their taxable profits. For the 2024/25 tax year this is up to 25%, with a small profits rate of 19% and marginal relief applying where profits fall between the two thresholds.
Section E: Calculating Capital Gains Tax
Capital Gains Tax is only payable on the increase in value of a chargeable asset. The gain is the difference between what you paid for the asset (including allowable costs) and what you received on disposal, less any reliefs or allowances you are entitled to claim.
Where an asset is gifted or transferred, the calculation is based on the market value at the time of disposal rather than the amount actually received. All gains in a tax year are added together to arrive at total net gains, from which the Annual Exempt Amount and any allowable losses are deducted.
The rate of Capital Gains Tax depends on your total taxable income. If your income plus gains falls within the basic rate band, you will pay the lower CGT rates. Gains above this threshold are charged at higher rates.
1. Step-by-Step Guide to Calculating CGT
Step 1: Determine Disposal Proceeds
Work out the amount received on disposal. For sales this is the selling price; for gifts or transfers, it is the market value at the date of disposal.
Step 2: Identify the Cost Basis
Establish the acquisition cost, including purchase price, legal fees, Stamp Duty Land Tax, and improvement costs that add to the value of the asset.
Step 3: Compute the Capital Gain
Subtract the cost basis from the disposal proceeds:
Capital Gain = Disposal Proceeds − Cost Basis
Step 4: Apply Reliefs and Allowances
Deduct any reliefs or exemptions, such as Private Residence Relief, Business Asset Disposal Relief, or the Annual Exempt Amount (£3,000 for individuals; £1,500 for most trusts).
Step 5: Calculate the Taxable Gain
Taxable Gain = Capital Gain − Reliefs/Exemptions
Step 6: Apply the Correct CGT Rate
Apply the appropriate rate based on your income and the asset type. Basic rate taxpayers pay 10% (18% on residential property), while higher and additional rate taxpayers pay 20% (24% on residential property and carried interest).
2. Example CGT Calculations
Example 1: Individual Selling Shares
| Step | Calculation | Amount (£) |
|---|---|---|
| Disposal Proceeds | Sale price of shares | 20,000 |
| Cost Basis | Purchase price + fees | 10,000 |
| Capital Gain | 20,000 − 10,000 | 10,000 |
| Annual Exempt Amount | Deduction for 2024/25 | 3,000 |
| Taxable Gain | 10,000 − 3,000 | 7,000 |
| CGT Rate | Basic rate taxpayer (10%) | 10% |
| CGT Payable | 7,000 × 10% | 700 |
Example 2: Sole Trader Selling Business Premises
| Step | Calculation | Amount (£) |
|---|---|---|
| Disposal Proceeds | Sale price of premises | 500,000 |
| Cost Basis | Purchase + improvement costs | 300,000 |
| Capital Gain | 500,000 − 300,000 | 200,000 |
| Annual Exempt Amount | Deduction for 2024/25 | 3,000 |
| Taxable Gain | 200,000 − 3,000 | 197,000 |
| CGT Rate | Higher rate taxpayer (20%) | 20% |
| CGT Payable | 197,000 × 20% | 39,400 |
Example 3: Trust Selling a Collectible
| Step | Calculation | Amount (£) |
|---|---|---|
| Disposal Proceeds | Sale price of antique | 12,000 |
| Cost Basis | Purchase price | 5,000 |
| Capital Gain | 12,000 − 5,000 | 7,000 |
| Annual Exempt Amount | Trust allowance 2024/25 | 1,500 |
| Taxable Gain | 7,000 − 1,500 | 5,500 |
| CGT Rate | Trust rate (20%) | 20% |
| CGT Payable | 5,500 × 20% | 1,100 |
3. Joint Ownership and Shared Assets
Where assets are jointly owned, each owner is responsible for their share of the gain. The gain is split according to ownership share, and each owner can apply their own Annual Exempt Amount and reliefs.
For example, if two individuals jointly sell a property for £200,000, originally purchased for £100,000, the total gain is £100,000. Each person’s share is £50,000. After applying the £3,000 Annual Exempt Amount, each has a taxable gain of £47,000. The applicable rate then depends on each person’s income band.
Section F: Capital Gains Tax Exemptions and Reliefs
Various exemptions and reliefs are available under UK Capital Gains Tax rules to reduce or defer liability. These provisions aim to encourage investment, support business owners, and provide relief in specific personal circumstances.
| Relief / Exemption | Eligibility | Maximum Amount |
|---|---|---|
| Private Residence Relief (PRR) | Main home used as your only or principal residence | Unlimited |
| Business Asset Disposal Relief (BADR) | Qualifying business assets owned ≥2 years | £1 million lifetime limit |
| Letting Relief | Property let while also your main residence (post–Apr 2020 rule) | Up to £40,000 |
| Annual Exempt Amount | All taxpayers | £3,000 (individuals), £1,500 (most trusts) |
1. Private Residence Relief (PRR)
Private Residence Relief exempts gains on the sale of your main home. The property must have been your only or principal residence throughout ownership, though certain absences (such as work-related moves) can still qualify. If the property was not always your main home, partial relief may be available, apportioned by the period of qualifying occupation.
2. Business Asset Disposal Relief (BADR)
Business Asset Disposal Relief (previously Entrepreneurs’ Relief) reduces the CGT rate to 10% on qualifying disposals, up to a lifetime limit of £1 million in gains. It applies to sole traders, partners, and company shareholders with at least 5% of shares and voting rights, provided they meet the two-year ownership and trading activity requirements.
3. Letting Relief
Letting Relief is restricted since April 2020 and now only applies if you lived in the property at the same time as your tenant. It can provide relief of up to £40,000 (£80,000 for a couple) on top of PRR. It no longer applies to properties that were simply let after you moved out.
4. Gift Hold-Over Relief
Gift Hold-Over Relief allows you to defer CGT when gifting certain business assets or shares in a trading company. Instead of paying CGT immediately, the gain is “held over” and effectively transferred to the recipient, who will become liable when they dispose of the asset. This is particularly useful for succession planning and family business transfers.
5. Other Common Exemptions
a. Transfers to Spouse or Civil Partner
Transfers between spouses or civil partners are exempt from CGT. This can be used strategically to utilise each person’s Annual Exempt Amount and potentially benefit from lower tax bands.
b. Inherited Assets
No CGT is due on death. Instead, assets are rebased to market value at the date of death, with future disposals taxed from that base value. Inheritance Tax may apply to the estate.
c. Chattels Exemption
Personal possessions worth under £6,000 are exempt. This includes items such as jewellery, antiques, and artwork.
d. ISA and Pension Investments
Gains made inside Individual Savings Accounts (ISAs), Personal Equity Plans (PEPs), and registered pension schemes are exempt from CGT.
e. Enterprise Investment Schemes (EIS/SEIS)
Investments in qualifying companies through the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) may benefit from deferral or exemption of CGT, in addition to income tax reliefs.
f. Venture Capital Trusts (VCTs)
Gains from shares in Venture Capital Trusts are exempt from CGT if certain conditions are met.
g. Charitable Gifts
Gifts to UK-registered charities are exempt from Capital Gains Tax.
h. Relief for Losses
Capital losses can be offset against gains in the same year, with any excess carried forward indefinitely to reduce future CGT liabilities.
Section G: Reporting & Paying Capital Gains Tax
Capital Gains Tax must be declared to HMRC in line with the UK’s reporting rules. The method and timing of reporting depend on the type of asset and whether the disposal involves UK property. Failure to report or pay on time can result in penalties and interest charges.
1. How to Declare a CGT Liability
Most taxpayers report Capital Gains Tax through the annual Self Assessment process using form SA108. Trustees and personal representatives use SA905 (Trust and Estate Capital Gains). For property disposals, HMRC also provides a specific online “Capital Gains Tax on UK Property” return service.
Gains can be reported using:
- HMRC’s online real-time CGT service (for property disposals)
- Self Assessment (SA108/SA905)
- Paper returns, where permitted
2. Deadlines for Reporting Capital Gains Tax
The reporting deadline depends on the type of disposal:
a. Non-Property Assets
For disposals of shares, investments, or other non-property assets, gains must be reported on the Self Assessment return by 31 January following the end of the tax year. For example, gains made in the 2024/25 tax year must be reported by 31 January 2026.
b. UK Residential Property
Since 27 October 2021, UK residents must report and pay CGT on disposals of UK residential property within 60 days of completion. Non-residents must use the same 60-day reporting rule for all UK property and land disposals, including commercial property and indirect disposals of property-rich entities.
3. Payment Deadlines
The deadline for paying Capital Gains Tax is aligned with the reporting deadline:
- For Self Assessment disposals: 31 January following the end of the tax year
- For UK residential property: payment due within 60 days of completion
Payments can be made online, by bank transfer, by debit/credit card, or by cheque. Late payment attracts interest, and HMRC may impose penalties for non-compliance.
Section H: Tips for Reducing Your Capital Gains Tax Liability
There are several legitimate ways to reduce or defer Capital Gains Tax. Making use of allowances, timing disposals effectively, and using tax-advantaged accounts can all lower your overall CGT bill. Planning ahead ensures you retain more of your gains.
1. Legal Strategies for Minimising CGT
| Strategy | Details |
|---|---|
| Timing Your Sales | Spread disposals across tax years to maximise use of the Annual Exempt Amount (£3,000 for individuals). This avoids concentrating gains in a single year at higher tax rates. |
| Offsetting Losses | Dispose of underperforming assets to realise losses. Losses can be used to offset gains in the same year, with any unused balance carried forward indefinitely. |
| Spousal Transfers | Transfers between spouses or civil partners are exempt. By gifting assets, couples can use both Annual Exempt Amounts and potentially benefit from lower rates if one partner is in a lower tax band. |
| Using ISAs | Investing within an Individual Savings Account shelters gains and income from Capital Gains Tax entirely. |
| Pension Contributions | Contributing to a pension reduces taxable income, which may keep more of your gains within the basic rate band, lowering the CGT rate applied. |
| EIS & SEIS | Investing in Enterprise Investment Schemes (EIS) or Seed Enterprise Investment Schemes (SEIS) can provide CGT deferral or exemption alongside income tax reliefs. |
| VCTs | Gains from Venture Capital Trust investments are exempt from CGT if qualifying conditions are met. |
2. Using Exemptions and Reliefs Effectively
Maximise Private Residence Relief by ensuring your main home is correctly nominated where you own more than one property. For Business Asset Disposal Relief, plan disposals to meet the two-year ownership and trading requirements. If you have let part of your home, check whether Letting Relief applies (post–April 2020, only available where you lived with the tenant). Making full use of your Annual Exempt Amount each year through careful timing of disposals can also significantly reduce liability.
3. Importance of Record-Keeping
Maintaining detailed records is essential for substantiating Capital Gains Tax calculations and relief claims. Keep:
- Purchase and sale contracts
- Receipts for improvement costs
- Evidence of residence for PRR claims
- Certificates for EIS/SEIS investments
- Records of pension contributions and spousal transfers
Good record-keeping ensures you can calculate gains accurately, evidence claims for reliefs, and defend your position if queried by HMRC.
Section I: Common Capital Gains Tax Mistakes to Avoid
Errors with Capital Gains Tax are common and can be costly. Misreporting, overlooking reliefs, or failing to meet deadlines can result in higher tax bills, HMRC penalties, and unnecessary scrutiny. Being aware of common pitfalls helps ensure compliance and reduces risk.
1. Errors in Reporting and Calculation
One of the most frequent mistakes is miscalculating the gain by not including all allowable costs such as purchase fees, Stamp Duty Land Tax, legal expenses, or capital improvements. Failing to deduct these correctly can overstate the gain and inflate the tax bill.
Incorrect disposal proceeds are another issue. Disposals must be based on market value where assets are gifted or transferred, not just the amount actually received. Omitting disposals such as cryptocurrency, overseas assets, or part-disposals can also cause under-reporting.
2. Misunderstanding Exemptions and Reliefs
Reliefs such as Private Residence Relief must be claimed correctly. The property must genuinely have been your main home, and partial relief is only available for qualifying periods of residence. Business Asset Disposal Relief requires at least two years of ownership and trading — missing these conditions invalidates the claim. Since April 2020, Letting Relief is only available where you lived in the property at the same time as your tenant, a rule often overlooked by landlords.
Failure to use the Annual Exempt Amount each year also leads to avoidable tax. Gains can sometimes be staggered over multiple years to maximise allowances.
3. Ignoring Capital Losses
Capital losses are valuable but frequently under-utilised. Losses must be reported to HMRC to be carried forward, and they can be offset against current or future gains. Not claiming them can lead to unnecessarily high CGT bills in later years.
4. Consequences of Non-Compliance
Late filing or late payment attracts interest and penalties. HMRC applies strict sanctions for inaccuracies, and serious or deliberate non-compliance can trigger investigations, further penalties, and even prosecution. Incorrectly claiming reliefs or exemptions can result in disallowance, leaving you with a higher liability plus interest. For businesses and professionals, repeated errors may also damage reputation and financial credibility.
5. How to Avoid Mistakes
To avoid these issues, keep full records of purchases, disposals, and associated costs. Stay up to date with Capital Gains Tax rules, rates, and reporting deadlines. Where disposals are complex — for example involving trusts, business assets, or non-residency — seek professional advice. Reviewing calculations carefully before submission and using HMRC’s online resources can further reduce the risk of errors.
Section J: Summary
Capital Gains Tax is a self-assessed tax, meaning it is the taxpayer’s responsibility to identify, calculate, report, and pay the correct amount of tax on chargeable gains. HMRC does not calculate this for you. The key compliance duties include keeping accurate records, applying the correct reliefs and allowances, and reporting disposals within the required deadlines, such as the 60-day return for UK residential property.
Non-compliance can result in penalties, interest, and HMRC scrutiny. Complex areas such as Private Residence Relief, Business Asset Disposal Relief, trust disposals, and the new rules for non-domiciled individuals from April 2025 can make the system difficult to navigate without professional guidance. The recent reduction in the Annual Exempt Amount from £12,300 to £3,000 means more disposals will now attract a Capital Gains Tax liability, making accurate compliance more important than ever.
Taking professional advice can help ensure that you meet your obligations, make effective use of reliefs, and avoid costly mistakes. For individuals, trustees, and businesses, proactive planning can minimise exposure to Capital Gains Tax and provide greater certainty in managing future transactions.
Section K: FAQs
What is Capital Gains Tax (CGT)?
Capital Gains Tax is a tax on the profit (the “gain”) when you sell or otherwise dispose of an asset that has increased in value. The tax is on the gain, not the total proceeds.
Who needs to pay Capital Gains Tax?
UK residents pay CGT on worldwide gains. Non-residents are liable for CGT on UK property and land, including certain disposals of property-rich entities. Trusts and personal representatives may also have CGT liabilities.
What is the Annual Exempt Amount for CGT?
For the 2024/25 tax year, the allowance is £3,000 for individuals and £1,500 for most trusts. If multiple trusts are created by the same settlor, the exemption is shared, subject to a minimum of £300 per trust.
What assets are subject to Capital Gains Tax?
Chargeable assets include second homes, rental properties, shares, business assets, personal possessions worth over £6,000, and cryptocurrencies. Certain assets, such as ISAs, pensions, UK gilts, and lottery winnings, are exempt.
What are the current Capital Gains Tax rates?
For disposals on or after 30 October 2024, most assets are taxed at 10% (basic rate) or 20% (higher/additional rate). Residential property and carried interest are taxed at 18% (basic rate) or 24% (higher/additional rate).
How is Capital Gains Tax calculated?
CGT is based on the disposal proceeds minus the acquisition cost and allowable expenses. Reliefs and the Annual Exempt Amount are then deducted, and the correct rate applied depending on income and asset type.
When do I need to report CGT to HMRC?
For non-property assets, report by 31 January following the end of the tax year via Self Assessment. For UK residential property, UK residents and non-residents must report and pay within 60 days of completion.
How do I report and pay Capital Gains Tax?
You can report online using HMRC’s “Capital Gains Tax on UK Property” service or include gains in your Self Assessment return (SA108 for individuals, SA905 for trusts). Payment is due by the same deadline as reporting.
What happens if I don’t report Capital Gains Tax on time?
Late reporting or late payment results in interest and penalties. HMRC may also open an enquiry, leading to further compliance checks and potential fines.
Can I transfer assets to my spouse to reduce CGT?
Yes. Transfers between spouses or civil partners are exempt, allowing each to use their own Annual Exempt Amount and potentially lower tax rates.
Do I pay CGT on inherited assets?
No CGT is due when assets are inherited. Instead, they are rebased to market value at the date of death. CGT may be payable later if the asset is disposed of and has risen in value since inheritance.
Are there reliefs available to reduce CGT?
Yes. Reliefs include Private Residence Relief, Business Asset Disposal Relief, Letting Relief (restricted since April 2020), and Gift Hold-Over Relief. Reliefs for losses, EIS, SEIS, and VCT investments may also apply.
Section L: Glossary
| Term | Definition |
|---|---|
| Annual Exempt Amount | The annual allowance of gains free from Capital Gains Tax. For 2024/25: £3,000 for individuals, £1,500 for most trusts (minimum £300 if shared across multiple trusts). |
| Business Asset Disposal Relief (BADR) | A relief reducing CGT to 10% on qualifying business disposals, up to a lifetime gains limit of £1 million. Previously known as Entrepreneurs’ Relief. |
| Capital Gains Tax (CGT) | A UK tax on the profit realised when a chargeable asset is sold, gifted, or otherwise disposed of for more than its acquisition cost. |
| Chattels | Personal possessions such as jewellery, antiques, or artwork. Gains are subject to CGT if sold for more than £6,000. |
| Cost Basis | The original acquisition value of an asset, including purchase price, legal fees, taxes, and allowable improvements, used to calculate gains. |
| Disposal Proceeds | The amount received, or deemed to have been received (e.g. market value), when an asset is sold, gifted, or otherwise disposed of. |
| Entrepreneurs’ Relief | The former name for Business Asset Disposal Relief. Provided a reduced 10% CGT rate on qualifying business disposals. |
| HMRC | His Majesty’s Revenue & Customs, the UK government department responsible for administering and collecting Capital Gains Tax. |
| Indexation Allowance | A relief (abolished for individuals from April 1998) that adjusted the acquisition cost of assets for inflation when calculating gains. |
| Inheritance Tax (IHT) | A separate tax on the value of a deceased person’s estate. CGT does not apply on death, as assets are rebased to market value at the date of death. |
| Letting Relief | A relief reducing gains on a property that was your main home and was also let, but since April 2020 only available if you lived there at the same time as the tenant. |
| Private Residence Relief (PRR) | An exemption from CGT for gains on your main home, provided it has been your only or principal residence during ownership. |
| Self Assessment | HMRC’s system under which taxpayers report income and gains and calculate their own tax liabilities, including CGT, typically via form SA108. |
| Taper Relief | A former relief (abolished in 2008) that reduced CGT for assets held over a certain period, rewarding long-term ownership. |
| Taxable Gain | The portion of a capital gain that is subject to CGT after deducting allowable costs, losses, reliefs, and the Annual Exempt Amount. |
| Venture Capital Trusts (VCTs) | Investment vehicles that provide investors with exemptions from CGT on qualifying gains, alongside other tax advantages. |
Section M: Additional Resources
For more information on Capital Gains Tax, the following official resources provide detailed guidance and tools:
HMRC – Capital Gains Tax Overview
https://www.gov.uk/capital-gains-tax
Comprehensive guidance on what Capital Gains Tax is, how it works, and current rates and allowances.
HMRC – Self Assessment Tax Returns
https://www.gov.uk/self-assessment-tax-returns
Information on completing and filing Self Assessment, including how to report capital gains.
HMRC – Private Residence Relief
https://www.gov.uk/tax-relief-selling-home
Details on claiming relief when selling your main home, including eligibility and calculation rules.
HMRC – Business Asset Disposal Relief
https://www.gov.uk/business-asset-disposal-relief
Guidance on claiming Business Asset Disposal Relief (BADR) on qualifying business disposals.
HMRC – Enterprise Investment Scheme (EIS)
https://www.gov.uk/government/publications/the-enterprise-investment-scheme-introduction
An introduction to the Enterprise Investment Scheme, including conditions and reliefs available.
HMRC – Seed Enterprise Investment Scheme (SEIS)
https://www.gov.uk/guidance/seed-enterprise-investment-scheme-background
Background and guidance on the Seed Enterprise Investment Scheme for investors in early-stage companies.
HMRC – Letting Relief
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet
HMRC helpsheet explaining Letting Relief and when it applies alongside Private Residence Relief.
HMRC – Venture Capital Trusts
https://www.gov.uk/guidance/venture-capital-trusts-venture-capital-schemes
Guidance on Venture Capital Trusts and their Capital Gains Tax benefits.
Citizens Advice – Capital Gains Tax
https://www.citizensadvice.org.uk/debt-and-money/tax/capital-gains-tax/
Practical, independent guidance on Capital Gains Tax, reporting obligations, and reliefs.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
