CGT basics (what you're actually paying on)
CGT is usually charged on your gain — the difference between what you sold an asset for and what it cost you (with some adjustments for certain costs and reliefs). It commonly shows up when you sell shares outside an ISA/pension, dispose of crypto, sell a second property, or sell a business asset.
It's triggered by a "disposal". A disposal can mean selling, gifting (in many cases), swapping, or transferring ownership. The UK rules can treat some gifts as if you sold at market value, even if you received no money.
You can owe CGT even if you reinvested the proceeds or the money is not sitting in your bank account. Plan for the tax bill as part of the decision to sell.
What is the annual exempt amount (AEA)?
The Annual Exempt Amount is a CGT allowance: you can realise gains up to this amount in a tax year without paying CGT. For 2025/26 and (unless changed) for 2026/27, the AEA is commonly understood as £3,000.
Key point: it's per person. Couples can sometimes plan disposals to use two AEAs, and two sets of basic rate bands — but you must follow the rules for ownership and transfers.
CGT rates (UK): assets vs residential property
UK CGT rates depend on your income band and the type of asset. The common headline rates are:
- Most assets: 10% (basic rate) or 20% (higher/additional rate)
- Residential property (not your main home): 18% or 24%
Your taxable income affects how much of your gain falls into the basic rate band vs the higher/additional rate band. In practice, this can make CGT planning feel more like "band management" than a simple flat rate.
If you can legally time disposals across tax years, you may use two years' AEAs and potentially keep more of the gain within the basic rate band.
Private Residence Relief (your main home)
CGT on your main home is often reduced or eliminated by Private Residence Relief (PRR), but it depends on facts: whether it was your only/main residence, periods of absence, and whether any part was used exclusively for business. If you're selling a property that's been rented out, partially used for business, or you own multiple properties, get clarity early.
BADR (Business Asset Disposal Relief)
BADR (formerly Entrepreneurs' Relief) can reduce CGT to 10% on qualifying disposals, up to a lifetime limit of £1,000,000 of gains. It's extremely valuable when you're selling a business or shares in a qualifying company — but the conditions matter (ownership %, role, holding period, and other rules).
Don't assume you qualify because you "own a company". Check the conditions for the tax year and the exact type of disposal. A small detail can change the outcome.
Reporting deadlines (don't miss these)
Most CGT is reported via Self Assessment. However, UK residential property gains often have a faster reporting/payment requirement: typically within 60 days of completion for reportable disposals. This is separate from the normal Self Assessment timeline.
If you sell a second home or rental property, check whether you must file a UK property CGT return within 60 days. Late filing can trigger penalties even if the tax due is small.
Legal ways people reduce CGT
1) Use ISAs and pensions (future-proofing)
The cleanest CGT strategy is often: don't create CGT in the first place. Investments held inside an ISA or pension aren't subject to CGT in the usual way. If you're investing regularly, using wrappers early can save years of admin and potential tax.
2) Bed & ISA (moving holdings into an ISA)
Bed & ISA is a process of moving investments you hold outside an ISA into the ISA wrapper. It can shelter future growth from CGT, and can simplify record‑keeping. However, it usually involves selling outside the ISA first, which may crystallise gains and use up your AEA.
3) Spouse/civil partner transfers
Transfers between spouses/civil partners are often treated as "no gain/no loss" for CGT, which means you can reallocate ownership legally before a sale. This can be useful to use two AEAs and manage which tax bands apply to the gain. The transfer needs to be genuine and reflect actual ownership.
Couples often review who owns which assets before a planned disposal. Done properly, it can reduce the overall CGT bill by using both people's allowances and bands.
4) Timing across tax years
Because the tax year resets on 6 April, timing matters. If you can split disposals across tax years, you may use more than one AEA and reduce the chance that your gain spills into higher rates.
5) Keep records (so you don't overpay)
CGT calculations rely on accurate cost basis. Keep purchase confirmations, broker statements, fees, and details of corporate actions (splits, consolidations). Poor records don't just create stress — they can lead to paying more tax than necessary.
Worked examples (quick intuition)
Example A (shares outside an ISA): You bought shares for £10,000 and sold them for £18,000. Ignoring fees, your gain is £8,000. If you have an AEA of £3,000, you might have £5,000 taxable gain. The rate depends on your income band.
Example B (second property): You sell a rental property at a gain. Your rate may be 18% or 24%. You may also face a 60‑day reporting requirement. The admin is often the painful part — start early.
CGT isn't isolated from the rest of your tax picture. The same gain can be taxed differently depending on your salary, other income, and other gains in the year.