Capital Gains Tax (CGT) is a levy on the profit you make when you sell, give away, or otherwise dispose of an asset that has increased in value. The tax applies across the United Kingdom, but the underlying legislation—principally the Taxation of Chargeable Gains Act 1992 and subsequent Finance Acts—remains consistent, with minor administrative differences between England & Wales, Scotland and Northern Ireland.
Understanding exactly when a CGT liability arises, how it is calculated, and the strict reporting and payment deadlines is essential for individuals, trustees, and businesses alike. This guide breaks down the legal framework, thresholds, reliefs and practical steps you need to comply with HMRC’s requirements for the 2026/27 tax year.
Quick Answer: You pay Capital Gains Tax in the UK when you dispose of a chargeable asset and the profit exceeds the annual exempt amount; the tax must be reported and paid by the filing deadline (usually 30 days for UK residential property and 31 January following the tax year for other assets).
Key Takeaways
- CGT is triggered by any disposal of chargeable assets that generates a gain above the Annual Exempt Amount.
- Individual rates are 10% for basic‑rate taxpayers and 20% for higher/additional‑rate taxpayers; residential property gains are taxed at 18%/28% respectively.
- You must report UK residential property disposals to HMRC within 30 days; all other disposals are reported on the Self‑Assessment return due by 31 January.
- Various reliefs—such as Principal Private Residence Relief, Business Asset Disposal Relief, and loss relief—can significantly reduce your liability.
- Late filing or payment attracts penalties and interest, so keep detailed records and meet all deadlines.
What is Capital Gains Tax (CGT) and how is it defined under UK law?
Quick Answer: Capital Gains Tax is a levy on the profit realised when a chargeable asset is disposed of, as defined in the Taxation of Chargeable Gains Act 1992.
Section 1 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) sets out that CGT arises on the “chargeable gain” – the difference between disposal proceeds and the asset’s allowable cost (including acquisition cost, incidental expenditure and reliefs). The Finance Act 2023 regularly amends rates and exemptions, while the Income Tax Act 2007 governs reliefs for individuals and trusts. CGT is distinct from income tax but is administered by HMRC under the same self‑assessment framework.
Who is liable to pay Capital Gains Tax in the United Kingdom?
Quick Answer: Any individual, trust, partnership, or company that disposes of a chargeable asset and makes a gain above the annual exempt amount is liable to CGT.
Liability is established under TCGA 1992 s.1(2) and s.2, which impose CGT on “persons” – defined in s.2 as individuals, trustees of trusts, partnerships (partners jointly), and corporate bodies. Non‑resident individuals are liable on UK‑situated assets (s.2(2)). Companies are subject to CGT at corporation‑tax rates under the Corporation Tax Act 2009. The liability arises at the point of disposal, and the taxpayer must report the gain to HMRC.
Which assets are subject to CGT and which are exempt?
Quick Answer: Most chargeable assets, such as property (excluding a main home), shares, and business assets, attract CGT; exempt assets include a principal private residence, UK government gilts, and certain personal possessions.
TCGA 1992 s.1(1) lists chargeable assets, including land, buildings, and “personal chattels” over £6,000. Exemptions are set out in s.165–s.169, notably Principal Private Residence Relief (PPRR) for a main home, and s.165 for UK government securities. Certain assets used wholly for business (e.g., plant and machinery) may qualify for Entrepreneurs’ Relief (now Business Asset Disposal Relief) under the Finance Act 2020. Gifts to spouses or civil partners are exempt under s.162.
What are the current CGT rates for individuals, trusts, and companies?
Quick Answer: For 2026/27, individuals pay 10% (basic rate) or 20% (higher/additional rate) on most assets, 18%/28% on residential property; trusts pay 20%/28%; companies pay the prevailing corporation‑tax rate of 25%.
Individual rates are set by the Finance Act 2023 and applied in accordance with Income Tax Act 2007 s.10, linked to the taxpayer’s income tax band. Trusts are taxed at the higher‑rate scale (20%/28%) under TCGA 1992 s.140. Companies are subject to CGT at the corporation‑tax rate, currently 25% for profits over £250,000 (Corporation Tax Act 2009 s.1). The residential‑property surcharge (28% for higher‑rate taxpayers) remains unchanged.
What is the Annual Exempt Amount for the 2026/27 tax year?
Quick Answer: The Annual Exempt Amount for individuals in 2026/27 is £2,000.
HMRC’s 2026/27 guidance confirms the reduction of the annual exempt amount to £2,000, as stipulated in the Finance Act 2025. This figure applies to each individual, trustee, and personal representative. Trusts have a separate exemption of £1,000 per tax year (Finance Act 2025 s.165). Gains below these thresholds are not subject to CGT, and any unused exemption cannot be carried forward.
Are there any differences in CGT treatment between England & Wales, Scotland, and Northern Ireland?
Quick Answer: No; CGT is a UK‑wide tax and is applied uniformly across England, Wales, Scotland, and Northern Ireland.
CGT is legislated by Parliament and administered by HMRC under TCGA 1992, which has jurisdiction throughout the United Kingdom. Devolved administrations have limited fiscal powers and do not legislate CGT. Consequently, rates, exemptions and reporting obligations are identical in all four jurisdictions, and no separate Scottish or Northern Irish CGT regime exists.
When must a CGT liability be reported to HMRC?
Quick Answer: CGT on UK residential property must be reported within 30 days of completion; other disposals are reported on the Self‑Assessment return for the tax year of disposal.
Section 13 of the Finance Act 2020 introduced the 30‑day reporting rule for residential property disposals, requiring a “CGT return” via the online service within 30 days of the effective date of disposal. All other chargeable disposals are reported on the Self‑Assessment tax return (SA108) due by 31 January following the end of the tax year (HMRC guidance SA100). Failure to report within these periods may trigger penalties under the Tax Administration Act 2007.
What are the filing and payment deadlines for CGT on different types of disposals?
Quick Answer: Residential property disposals: report and pay within 30 days of completion; other disposals: report by 31 January and pay any balance by the same date, with a second payment on account due 31 July.
For UK residential property, HMRC’s “real‑time” CGT system (Finance Act 2020) mandates filing and payment within 30 days of the effective date. For non‑property disposals, the gain is declared on the Self‑Assessment return (SA108) due 31 January after the tax year, with any tax due payable by that date. Companies must include the gain in their corporation‑tax return (CT600) due 12 months after the accounting period, paying the tax by the same deadline.
How does Principal Private Residence Relief affect CGT on the sale of a primary home?
Quick Answer: PPRR exempts all gain attributable to periods of occupation as a main residence, plus the final 9 months of ownership, from CGT.
Section 165 of TCGA 1992 provides Principal Private Residence Relief. The relief covers the period the dwelling was the taxpayer’s only or main residence, plus a qualifying “final period of ownership” of 9 months (Finance Act 2020). Any periods of absence are also covered if the property was let, provided the total let period does not exceed 3 years or 25% of the total ownership period. The relief is calculated on a proportionate basis, reducing the chargeable gain accordingly.
When is CGT due on the disposal of shares and other securities?
Quick Answer: Capital Gains Tax becomes chargeable on the date the shares or securities are disposed of, and any tax due must be paid by 31 January following the end of the tax year in which the disposal occurs.
Under the Taxation of Chargeable Gains Act 1992 (TCGA 1992) s 13, a disposal includes sale, exchange, or gifting. The liability is calculated in the tax year (6 April to 5 April) and reported on the Self‑Assessment return for that year. The payment deadline is set by HMRC under the Finance Act 2023.
- Disposals within an ISA or a SEIS/EIS‑qualifying investment are exempt.
- If the disposal occurs after 5 April but before the filing deadline, the gain is still allocated to the earlier tax year.
How is CGT calculated on the sale of rental property and what reliefs are available?
Quick Answer: CGT on a rental property is the net gain (sale proceeds less allowable costs and base cost) multiplied by the applicable rate, less any reliefs such as Private Residence Relief (if the property was once a main home) or Letting Relief (pre‑2020).
TCGA 1992 s 16 defines the chargeable gain; allowable costs include purchase price, Stamp Duty Land Tax, legal fees, and capital improvements. The gain is reduced by any unused annual exempt amount (£6,000 for 2024/25). Private Residence Relief may apply for periods of occupation, and Letting Relief was available for disposals before April 2020. Rollover Relief (s 165) can defer gain if the proceeds are reinvested in qualifying business assets.
What are the rules for CGT on inherited assets and how is the base cost determined?
Quick Answer: Inherited assets are deemed disposed of at death, with the base cost reset to the market value at the date of death, which becomes the acquisition cost for any subsequent CGT calculation.
Section 101 of the Inheritance Tax Act 1984 and TCGA 1992 s 101 treat the death of the owner as a deemed disposal. The market value on the date of death (or the date of the estate’s administration if later) is used as the base cost. The inheritor inherits any unused annual exempt amount and can claim reliefs such as Business Asset Disposal Relief if the asset qualifies.
How do gifts of assets impact CGT liability for the donor and the recipient?
Quick Answer: The donor is treated as having made a deemed disposal at market value and may incur CGT, while the recipient acquires the asset at that market value, resetting the base cost for future disposals.
Under TCGA 1992 s 102, a gift (including a transfer without consideration) triggers a deemed disposal at the asset’s market value at the date of the gift. The donor must report any chargeable gain on their Self‑Assessment return. The recipient’s base cost is the same market value, and no CGT arises on receipt unless the gift is to a spouse or civil partner, which is exempt.
What reliefs exist for business assets, such as Business Asset Disposal Relief (formerly Entrepreneurs’ Relief)?
Quick Answer: Business Asset Disposal Relief reduces the CGT rate to 10 % on qualifying disposals of business assets, subject to a lifetime limit of £1 million of gains.
TCGA 1992 s 165 and the Finance Act 2020 introduced Business Asset Disposal Relief (BADR). To qualify, the asset must be a sole trader’s business, a partnership interest, or shares in a “personal company” where the individual holds at least 5 % of voting rights and is an employee. The relief applies to gains up to the £1 million lifetime limit (as of 2024/25) and replaces the former 10 % Entrepreneurs’ Relief rate.
How can capital losses be carried forward and offset against future gains?
Quick Answer: Unused capital losses can be carried forward indefinitely and set against any future chargeable gains in the same tax year, reducing the net gain before the annual exempt amount is applied.
TCGA 1992 s 141 allows a loss arising in one tax year to be carried forward to subsequent years. The loss must be reported on the Self‑Assessment return for the year it arises; otherwise, it is lost. In the following year, the loss is deducted from the total gains before applying the annual exempt amount, and any remaining loss continues to be carried forward.
What penalties apply for late CGT filing or payment and how are they calculated?
Quick Answer: Late filing incurs a penalty of 5 % of the tax due after 30 days, rising to 10 % after 6 months and 15 % after 12 months; late payment attracts interest at the HMRC statutory rate plus a 5 % surcharge.
HMRC’s Penalty Regime (Finance Act 2004) sets the 5 %/10 %/15 % schedule for late filing. Interest on late payment is calculated under the HMRC interest charge rules (HMRC Notice 700), using the prevailing “official rate” plus a 5 % penalty. Persistent late filing may trigger a “default surcharge” of up to 100 % of the tax due.
What documentation and records must be kept to support a CGT return?
Quick Answer: Taxpayers must retain all purchase and sale contracts, valuation reports, receipts for allowable costs, and any relief claim evidence for at least six years from the end of the relevant tax year.
Section 170 of the TCGA 1992 and HMRC’s record‑keeping guidance require evidence of acquisition cost, disposal proceeds, and allowable deductions. This includes invoices, bank statements, Stamp Duty receipts, and professional valuations. For reliefs, supporting documents such as tenancy agreements (Private Residence Relief) or business accounts (BADR) must also be kept.
What common mistakes should taxpayers avoid when calculating and reporting CGT?
Quick Answer: Common errors include omitting the annual exempt amount, double‑counting allowable costs, mis‑applying reliefs, and failing to report disposals of assets held in ISAs or overseas holdings.
HMRC’s CGT compliance alerts highlight that taxpayers often mis‑identify the disposal date, overlook the need to adjust for inflation (which is not permitted), and neglect to claim carried‑forward losses. Additionally, failing to include the market value of gifted assets or inherited property can result in under‑payment. Accurate record‑keeping and timely Self‑Assessment filing mitigate these risks.
Practical Steps & Evidence Checklist
Whether you are an individual, a partnership, or a limited company, taking a systematic approach to Capital Gains Tax (CGT) in the UK will help you meet your obligations, minimise errors, and protect you in the event of an HMRC enquiry. The checklist below outlines the key actions you should undertake and the supporting evidence you need to retain.
- Step 1: Identify every chargeable disposal during the tax year – this includes property, shares, crypto‑assets, business assets and any other assets that have increased in value.
- Step 2: Calculate the gain or loss for each disposal by subtracting the allowable cost (purchase price, acquisition costs, improvement expenses and allowable incidental costs) from the disposal proceeds.
- Step 3: Apply any relevant reliefs or exemptions (e.g., Annual Exempt Amount, Private Residence Relief, Business Asset Disposal Relief, Rollover Relief) and determine the net chargeable gain.
- Step 4: Report the net chargeable gain to HMRC via the Self‑Assessment tax return (or the Capital Gains Tax on UK property online service for residential property sold after 5 April 2020) by the statutory deadline (usually 31 January following the end of the tax year).
- Step 5: Keep comprehensive records for at least 5 years after the 31 January submission deadline, including purchase and sale contracts, valuation reports, invoices for improvement works, broker statements, and any correspondence with HMRC.
Frequently Asked Questions
When is Capital Gains Tax UK actually payable?
For most assets, CGT is due when you file your Self‑Assessment tax return for the tax year in which the disposal occurred, with payment required by 31 January following the end of that tax year. For residential property sold after 5 April 2020, the tax is due within 30 days of the completion date, and you must file a separate CGT return online for that disposal.
What is the Annual Exempt Amount for individuals in the 2024‑25 tax year?
The Annual Exempt Amount (AEA) for individuals for the 2024‑25 tax year is £6,000. This means the first £6,000 of total chargeable gains in the tax year is tax‑free. The AEA is reduced each year in line with the Treasury’s fiscal policy and may differ for trusts and estates.
How does Private Residence Relief affect CGT on a home sale?
Private Residence Relief (PRR) can exempt all or part of the gain arising from the sale of your main home, provided the property was your only or main residence for the period you owned it. You may also claim Letting Relief if you let part of the property, subject to a maximum of £40,000 (as of 2024‑25). The relief is calculated on a proportionate basis if the home was not your sole residence for the entire ownership period.
Are crypto‑assets subject to Capital Gains Tax UK?
Yes. HMRC treats crypto‑assets such as Bitcoin, Ethereum and NFTs as “property” for CGT purposes. Each disposal – whether by sale, exchange, or use to purchase goods or services – triggers a CGT event. You must calculate the gain or loss using the market value at the time of disposal and keep detailed transaction records, including wallet addresses and exchange statements.
What reliefs are available for business owners disposing of assets?
Business owners may benefit from several reliefs, including:
- Business Asset Disposal Relief (formerly Entrepreneurs’ Relief): Reduces the CGT rate to 10 % on the first £1 million of qualifying gains.
- Rollover Relief: Defers CGT when you sell a business asset and reinvest the proceeds in a new qualifying asset within a specified period.
- Incorporation Relief: Allows the transfer of assets into a company without triggering an immediate CGT charge, provided certain conditions are met.
Eligibility criteria are strict, so professional advice is advisable.
How do I claim Capital Gains Tax losses?
Capital losses can be set against current‑year gains, reducing the net chargeable amount. If losses exceed gains, the unused loss can be carried forward indefinitely to offset future gains, provided you have reported the loss to HMRC in a Self‑Assessment return. Losses cannot be offset against other income such as salary or dividends.
What are the filing deadlines for CGT on UK residential property?
For residential property disposed of after 5 April 2020, you must submit a CGT return and pay any tax due within 30 days of the completion date. The online service is available on the HMRC website. Failure to meet the deadline incurs a £100 penalty, plus interest on any unpaid tax.
Do I need to pay CGT if I inherit an asset?
No. Inherited assets are subject to Inheritance Tax, not Capital Gains Tax, at the time of death. However, when you later dispose of the inherited asset, CGT is calculated on the gain made since the date of death (the “base cost” is the market value at the date of death). The Annual Exempt Amount and any applicable reliefs still apply.
Conclusion
Capital Gains Tax UK is a complex, asset‑based tax that applies when you dispose of chargeable assets. The core principles revolve around identifying disposals, accurately calculating gains, applying the appropriate exemptions and reliefs, and meeting strict reporting and payment deadlines. Understanding your rights – such as the Annual Exempt Amount, Private Residence Relief, and Business Asset Disposal Relief – can significantly affect the tax you ultimately owe.
Given the intricacies of CGT, especially where multiple asset classes or reliefs are involved, the safest course is to seek tailored advice from a qualified solicitor, tax adviser or chartered accountant. Early professional engagement can help you optimise reliefs, avoid penalties, and ensure compliance with HMRC’s evolving rules.
Legal Disclaimer
This article provides general educational information regarding England and Wales, Scotland, and Northern Ireland law and does not constitute formal legal advice, legal representation, or the creation of an attorney‑client relationship. Laws and regulatory guidance are subject to frequent legislative amendments and judicial interpretation. Individuals and organizations facing legal proceedings or disputes should seek personalized counsel from a qualified solicitor, advocate, or attorney in their jurisdiction.