Capital Gains Tax (CGT) is charged on the profit you make when you sell (or "dispose of") an asset that has increased in value. It is the gain that is taxed, not the total amount you receive. CGT applies to individuals and is separate from income tax, though your income tax band affects the CGT rate you pay.
What Assets Are Subject to CGT
- Shares and securities: Individual stocks, investment trusts, and other listed securities held outside an ISA or pension.
- Funds: Unit trusts, OEICs, and ETFs held in a general investment account.
- Second properties and buy-to-let: Residential property that is not your main home.
- Valuable personal possessions: Items worth over £6,000, such as jewellery, art, and antiques (known as "chattels").
- Cryptocurrency: Bitcoin, Ethereum, and other cryptoassets are treated as property for CGT purposes by HMRC.
- Business assets: Goodwill, intellectual property, and other assets sold when disposing of a business.
What Is Exempt from CGT
- Your main home: Principal Private Residence (PPR) relief means gains on your main home are normally completely exempt.
- ISAs: All gains within ISAs are completely tax-free.
- Pensions: Gains within a pension wrapper are not subject to CGT.
- Gifts to spouse or civil partner: Transfers between spouses are treated as "no gain, no loss" for CGT purposes.
- Cars: Private motor vehicles are exempt (they are classified as wasting assets).
- Betting and lottery winnings: Not subject to CGT.
- Government gilts and premium bonds: Exempt from CGT.
CGT Rates (2024/25)
Capital Gains Tax Rates
| Tax Band | Standard Assets | Residential Property |
|---|---|---|
| Basic rate taxpayer | 10% | 18% |
| Higher / additional rate taxpayer | 20% | 24% |
Your CGT rate depends on your total taxable income plus the gain. If adding the gain to your income pushes you into the higher rate band, the portion of the gain within the basic rate band is taxed at the lower rate and the remainder at the higher rate. Source: GOV.UK — CGT rates
Annual Exempt Amount
CGT Annual Exempt Amount
- 2024/25 individuals
- £3,000
- 2023/24 individuals
- £6,000
- 2022/23 individuals
- £12,300
- Trusts (2024/25)
- £1,500
The annual exempt amount has been dramatically reduced over recent years. Each individual has their own allowance, and it cannot be carried forward to future years — use it or lose it.
Reporting and Payment
The rules for reporting CGT depend on the type of asset:
- UK residential property: You must report the gain and pay any CGT due within 60 days of completion using the HMRC "report and pay" CGT on UK property service. This is a separate process from Self Assessment.
- Other assets (shares, crypto, etc.): Report on your Self Assessment tax return for the tax year in which the disposal takes place. The deadline is 31 January following the end of the tax year.
Strategies for Managing CGT
Bed and ISA
A "bed and ISA" involves selling investments held in a general investment account and immediately repurchasing the same investments within an ISA. Any future growth is then sheltered from CGT. You crystallise a gain on the sale (potentially using your annual exempt amount), but all future gains are tax-free. This is one of the most common and effective CGT management strategies.
Use Your Annual Exemption Each Year
With the annual exempt amount now at £3,000, it makes sense to crystallise small gains each year rather than letting large gains accumulate. Selling and repurchasing (or buying similar investments) each year to use the exemption can save significant tax over time.
Transfer to Spouse Before Selling
Transfers between spouses and civil partners are made at "no gain, no loss" for CGT purposes. If one spouse is a basic rate taxpayer and the other is a higher rate taxpayer, transferring the asset to the basic rate spouse before selling means the gain is taxed at 10% (or 18% for property) rather than 20% (or 24%). Both spouses also have their own annual exempt amount, potentially doubling the tax-free allowance to £6,000.
Key CGT Reliefs
- Business Asset Disposal Relief (BADR): Formerly Entrepreneurs' Relief. A 10% CGT rate on qualifying business disposals, up to a lifetime limit of £1 million. The business must have been owned for at least two years.
- Holdover Relief: When you give away a business asset (or certain other assets), you and the recipient can jointly elect to "hold over" the gain — the recipient takes on your original base cost, deferring the tax until they eventually sell.
- Principal Private Residence (PPR) Relief: Your main home is exempt from CGT. If you have lived in a property as your main home for part of the time you owned it, partial relief is available. The last 9 months of ownership are always treated as occupation.
- Letting Relief: Available where a property that qualifies for PPR relief has also been let out. The relief is now limited to situations where the owner shares occupancy with the tenant.
- EIS/SEIS CGT Deferral: Investing in qualifying Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) companies can defer or eliminate CGT on gains from other assets. EIS defers the gain until the EIS shares are disposed of; SEIS can exempt 50% of the gain reinvested.
For more on tax-efficient wrappers, see our ISA guide. For how CGT interacts with estate planning, see our inheritance tax guide — notably, assets receive a CGT-free uplift on death, which is a key consideration for estate planning.
This guide is for general information only and does not constitute financial advice. The information is based on publicly available data from HMRC and other government sources. Always seek professional advice before making financial decisions. Figures and thresholds are subject to change — check official sources for the latest values.