Selling a second home, cashing in some shares, or gifting a valuable painting can sometimes land you with an unexpected tax bill. That’s where Capital Gains Tax (CGT) comes in.
Put simply, CGT is the tax you pay on the profit you make when selling (or giving away) certain assets. It’s not about how much money you receive overall; it’s about the gain compared to what you originally paid. For example, if you bought a rental property for £150,000 and sold it for £200,000, the taxable gain is £50,000 (after deducting costs like solicitor fees or estate agent charges).
Here’s a straightforward breakdown of how CGT works in 2025/26, rates, allowances, deadlines, and a few innovative ways to keep more of your money.
Your tax-free allowance
Every individual has a £3,000 annual exempt amount in 2025/26. If your total yearly gains are below this, you don’t pay CGT. For trusts, the allowance is £1,500.
What assets are taxed?
CGT applies to a wide range of disposals, including:
- Property: Selling a buy-to-let or second home. Your primary residence is usually exempt, unless you’ve rented part of it out or used it exclusively for business.
- Shares and funds: Selling shares outside an ISA or pension, or disposing of cryptocurrency.
- Business assets: Land, goodwill, equipment, and in some cases shares in your own business.
- Gifts: Giving assets to someone other than your spouse/civil partner or a charity can trigger CGT.
- Inheritance: You don’t pay CGT when you inherit something, but if you later sell it, you may be taxed on the gain since the date of inheritance.
Some things are exempt, like ISAs, Premium Bonds, cars, or personal belongings worth under £6,000 (unless they’re part of a set).
CGT rates in 2025/26
The rate you pay depends on your income tax band and what you’re selling:
- Most assets:
- 10% if you’re a basic rate taxpayer
- 20% if you’re a higher/additional rate taxpayer
- Residential property (not your main home):
- 18% for basic rate taxpayers
- 24% for higher/additional rate taxpayers
- Business Asset Disposal Relief (BADR):
- Qualifying sales of business assets or shares are taxed at 14% (increased from 10%), with a £1 million lifetime limit.
Remember that if part of your gain pushes you into a higher tax band, that slice is taxed at the higher rate.
Key deadlines
- Residential property: You must report and pay CGT within 60 days of completion with HMRC’s UK Property Service. Missing this deadline can result in penalties and interest.
- Other assets: Report on your self-assessment tax return by 31 January following the end of the tax year.
Ways to reduce your CGT bill
There are plenty of legitimate ways to reduce the tax you owe:
- Use both spouses’ allowances: Assets transferred between spouses or civil partners are tax-free. This allows you to split ownership before selling, using two £3,000 exemptions and two sets of tax bands.
- Time disposals carefully: If your income will decrease next year, delaying a sale could save you tax. Similarly, offsetting gains with losses realised in the same tax year can reduce your bill.
- Shelter gains: Future growth on investments held within ISAs or pensions is sheltered from CGT.
- Reliefs: BADR for business sales, gift relief for certain shares or business assets, and Private Residence Relief for your main home can all significantly reduce your tax liability.
Each tactic above is part of what you need to know about CGT but needs tailoring to your wider tax position. Speak to our CGT tax planning specialists before making any transfer or sale.
Record-keeping
Good records save stress later – HMRC can request evidence up to 20 years after a sale. Keep:
- Contracts for buying and selling assets
- Invoices for improvements (not routine repairs)
- Professional fees (stamp duty, solicitor/agent costs)
- Valuations, if assets were inherited or gifted
Security and verification
When dealing with online tax submissions or queries about CGT, you may encounter prompts to verify you are human by completing an action. This verification process ensures the security of your connection before proceeding with sensitive information. Websites like www.litrg.org.uk may need to review the security of your connection before proceeding, asking you to complete actions to confirm you are human and not an automated bot. This step helps protect your data and ensures performance security while waiting for www.litrg.org.uk to respond.
Always be cautious and ensure you are on official government or trusted websites when submitting tax information or performing actions related to your CGT obligations.
Final thoughts
CGT isn’t designed to catch you out, but the rules can feel complicated, especially with rates and allowances changing in recent Budgets. More people than ever are being pulled into the system because of the low £3,000 allowance, so planning is essential.
Whether you’re considering selling a rental property, offloading shares, or handing down a business, the best move is to check the numbers before committing. With thoughtful planning and the right advice, you can stay compliant, avoid penalties, and keep more of your hard-earned gains.
Next steps and how we can help
By understanding what you need to know about CGT, you can plan disposals, stay within deadlines and use reliefs that Parliament intends to encourage enterprise. Our role is to turn complex rules into clear, actionable advice and to file accurate returns on time. Whether you want to sell a rental flat, crystallise a shareholding or pass a business on to the next generation, we will map out the tax cost, model the cashflow and manage the paperwork.
If you are already a Cottons client, please let your usual adviser know about any planned disposals well in advance so we can keep options open. If you are new to us, explore our tax advisory services or simply contact us for a free initial conversation. We will explain what you need to know about CGT in plain English and put a tailored plan in place. Your gains are hard-earned – let us help you keep more of them.
