Capital Gains Tax (CGT) is a tax on the profit made when you dispose of an asset that has increased in value. It is the gain, not the total proceeds, that is taxed. CGT applies to individuals and, in certain cases, trustees.

What is Capital Gains Tax?

CGT arises when you dispose of an asset, which includes:

  • Selling an asset
  • Gifting an asset (other than to a spouse/civil partner)
  • Exchanging or transferring ownership

Common assets subject to CGT include:

  • Property that is not your main residence
  • Shares and investments
  • Business assets

The taxable gain is broadly calculated as:

Sale proceeds – Purchase cost – Allowable costs = Taxable gain

 

Who does it apply to?

CGT typically applies to:

  • Individuals disposing of investment assets or property
  • Business owners selling all or part of their business
  • Landlords disposing of rental properties
  • Trustees managing trust assets

Some disposals are exempt, most notably the sale of your main residence and transfers to a spouse/civil partner.

 

Key Dates

  • CGT is usually reported and paid via the Self Assessment system
  • For most assets: due by 31 January following the end of the tax year
  • For UK residential property: this must be reported and paid within 60 days of completion

Late reporting or payment can result in penalties and interest.

 

Capital Gains Tax Rates (2026/27)

CGT rates depend on your income level:

Tax Band CGT Rate
Basic Rate 18%
Higher/Additional Rate 24%
  • Individuals also benefit from an Annual Exempt Amount of £3,000
  • Gains above this threshold are taxable at the rates above

Tax Planning Considerations

  • Use of annual exemption – Utilising the £3,000 allowance each year can reduce overall CGT exposure over time.
  • Spousal transfers – Transferring assets between spouses or civil partners (usually tax-free) can help maximise allowances and lower tax bands.
  • Timing of disposals – Spreading disposals across tax years may allow multiple exemptions and better use of lower tax rates.
  • Loss utilisation – Capital losses can be offset against gains, reducing the overall tax liability.
  • Business reliefs – Reliefs such as Business Asset Disposal Relief (BADR) can reduce the CGT rate to 18% on qualifying disposals, subject to lifetime limits.
  • Property planning – Understanding reliefs such as Private Residence Relief is key when disposing of property.

Cube Partners Tip 💡

CGT is one of the most planning sensitive taxes. The tax difference between disposing of an asset with or without planning can be significant — early advice is often the key to preserving value.