Capital Gains Tax
Written in plain language for general understanding. This is educational content, not legal advice. Based on UK Acts of Parliament, statutory instruments, and official guidance.
UK National Law
What is this right?
Capital Gains Tax (CGT) is a tax on the profit when you sell (or "dispose of") an asset that has increased in value. It applies to:
- Property (not your main home — see below)
- Shares and investments (outside of an ISA or pension)
- Business assets
- Valuable personal possessions worth over £6,000 (jewellery, art, antiques)
You have an Annual Exempt Amount — for 2024/25, this is £3,000. You only pay CGT on gains above this amount.
CGT rates: 10% (basic rate taxpayers) or 20% (higher/additional rate) for most assets. For residential property: 18% and 24% respectively.
When does it apply?
- You sell an asset for more than you paid for it (after deducting costs like solicitor fees, improvement costs, etc.).
- Your main home is exempt from CGT under Private Residence Relief — but second homes, buy-to-lets, and investment properties are not.
- Transfers between spouses or civil partners are CGT-free.
- Assets held in ISAs, pensions, or betting winnings are exempt.
What should you do?
- If you sell UK residential property and owe CGT, you must report it to HMRC within 60 days of completion and make a payment on account.
- For other assets, report gains through your Self Assessment tax return.
- Use your annual exempt amount each year — it can't be carried forward.
- Consider offsetting losses — if you made a loss on one asset, you can deduct it from gains on another.
What should you NOT do?
- Don't miss the 60-day reporting deadline for UK property sales — late reporting incurs penalties even if no tax is owed.
- Don't forget to deduct allowable costs — solicitor fees, estate agent fees, stamp duty, and improvement costs all reduce your gain.
- Don't assume giving an asset away avoids CGT — if you gift an asset, you're treated as selling it at market value for CGT purposes.
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