This guide explains what CGT is, when it applies, how much you may need to pay, and where it needs to be reported - both personally and in a business context. 

What Is Capital Gains Tax? 

Capital Gains Tax is charged on the profit you make when you sell or dispose of an asset that has increased in value. It’s important to note that CGT is not charged on the total sale proceeds - only on the gain. 

• Assets commonly subject to CGT include: 
• Second homes and buy‑to‑let properties 
• Shares and investments held outside ISAs or pensions 
• Business assets or shares in a trading company 
• Certain gifts (treated as being sold at market value)

Some assets are generally exempt, including your main residence in most cases, personal cars, and investments held within ISAs or pensions. 

How Much Capital Gains Tax Will You Pay? 

Each individual has an annual CGT allowance - known as the Annual Exempt Amount. This is:

£3,000 per individual (2025/26 tax year) 

£1,500 for most trusts 

If your total gains for the year are below this level, there is no CGT to pay. Any unused allowance cannot be carried forward. This allowance has reduced significantly in recent years, meaning more people now face CGT on relatively modest gains. 

CGT Rates 

CGT rates depend on your income tax band and the type of asset being sold. Rates are now broadly aligned at: 

18% for basic‑rate taxpayers 

24% for higher and additional‑rate taxpayers 

These rates apply to most chargeable assets, including property and shares. The point at which gains move from the lower to the higher rate depends on how much of your income tax bands have already been used. 

Worked Examples 

Example 1: Selling Shares 

You sell shares for £25,000. You originally bought them for £15,000 and incurred £500 in dealing fees. 

Gain: £25,000 − £15,000 - £500= £9,500 

Less CGT allowance: £9,500 − £3,000 = £6,500 taxable 

If you are a basic‑rate taxpayer, CGT at 18% would be £1,170. 

Example 2: Selling a Buy‑to‑Let Property 

You sell a rental property (not your main home) making a gain of £50,000. 

Less CGT allowance: £50,000 − £3,000 = £47,000 taxable 

If you are already a higher‑rate taxpayer, CGT at 24% would result in a liability of £11,280. 

Where and How Is Capital Gains Tax Reported? 

Individuals 

CGT must be reported and paid to HMRC, and the method depends on the asset sold: 

UK Residential Property 

The sale must be reported via HMRC’s CGT on UK Property service. Reporting and payment due within 60 days of completion, even if no tax is payable.

Other Assets (Shares, Business Interests, etc.) 

The sale is reported through your Self-assessment tax return. Tax due is by 31 January following the end of the tax year (unless required to submit through MTD for ITSA). Failure to report on time can result in penalties and interest, even if the tax itself is relatively small. 

Businesses and Companies 

Companies do not pay Capital Gains Tax. Instead, gains made by a company on assets are subject to Corporation Tax and reported within the company’s corporation tax return. 

Sole traders and partnerships pay CGT personally when disposing of business assets. 

Directors selling shares personally may trigger CGT. 

Reliefs such as Business Asset Disposal Relief may apply, reducing the CGT rate on qualifying business disposals. 

The distinction between personal and business ownership is crucial and often overlooked. 

Using losses and planning ahead 

Capital losses can be offset against gains in the same tax year or carried forward to future years, provided they are reported to HMRC. 

With the allowance now much lower, timing disposals across tax years, utilising spousal transfers, or using tax‑efficient wrappers such as ISAs can make a meaningful difference. 

Final Thoughts 

Capital Gains Tax is not just a “high‑value” tax anymore. With lower allowances and higher rates, many routine asset sales now trigger a CGT liability. 

The key takeaway is simple: CGT is easiest to manage before you sell, not after. Understanding the rules, reporting deadlines, and whether the disposal is personal or business‑related can help avoid surprises and ensure you remain compliant. 

If you are considering selling an asset, taking advice early can often reduce both risk and cost.