Selling a second home, cashing in a successful shareholding or handing on a valuable family heirloom can all trigger a tax bill that catches people off guard. Capital Gains Tax (CGT) is simple in theory – you pay tax on the profit you make when you sell or give away most assets – yet our experience shows that confusion about allowances, rates and deadlines is common. This article sets out what you need to know about CGT for the 2025/26 tax year so you can plan with confidence and keep more of your gains.
CGT revenues have doubled in a decade and now stand at £15.2 billion a year (HMRC, 2024), driven largely by rising property and share prices. At the same time, the annual exempt amount has been cut to just £3,000. As a result, more people than ever are being pulled into the CGT net. We often meet clients who have never filed a CGT return before, only to discover – sometimes after a sale – that they should have reported and paid within 60 days.
By outlining what you need to know about CGT – from the transactions that count, to the rates you will pay, to smart reliefs that reduce the bill – we aim to help you stay compliant and improve your cashflow. If you are already working with us at Cottons Group, consider this a refresher. If you are searching for guidance, we hope the detail below shows the value of specialist advice.
What you need to know about CGT rates and allowances in 2025/26
Annual exempt amount
Every individual has a £3,000 tax-free allowance for gains in 2025/26. Gains above this figure are taxable in the year they arise.
Rates for most assets
- Basic rate band: 10%
- Higher or additional rate band: 20%
Rates for residential property
- Basic rate band: 18%
- Higher or additional rate band: 24%
Remember: your income tax band determines which CGT rate applies. If your taxable income pushes part of the gain into a higher band, that slice is taxed at the higher CGT rate. Our online CGT calculator can give you a quick estimate.
Transactions that count: common scenarios
Below are the events we see most often. Knowing what you need to know about CGT before you commit can save a last-minute scramble.
- Residential property: Selling a buy-to-let or second home triggers CGT on any gain after allowable costs. Your main home is normally exempt, but beware of periods of letting or business use.
- Shares and funds: Disposing of unwrapped shares, unit trusts or cryptocurrency is taxable; gains on holdings inside an ISA or pension are not.
- Business assets: Selling goodwill, premises or equipment may attract Business Asset Disposal Relief (BADR) – formerly Entrepreneurs’ Relief – so the first £1 million of qualifying lifetime gains is taxed at 10%.
- Gifts to family: Giving shares or property to children (unless to a spouse or civil partner) counts as a disposal at market value, even if no money changes hands.
- Inherited assets: You pay CGT only on any gain made after the date of inheritance, not on the rise during the late owner’s lifetime.
Calculating your gain
To work out the profit – and therefore what you need to know about CGT for each asset – subtract the purchase price and any allowable costs from the sale proceeds. Allowable costs include:
- Improvement works: Capital expenses, not routine repairs.
- Professional fees: Stamp duty, estate agent and solicitor charges.
- Purchase costs: Broker fees and transaction taxes on shares.
If you acquired shares at different prices, you must follow HMRC’s share matching rules, pooling purchases within 30 days of disposal (HMRC, 2025). This area is where many DIY calculations go wrong; we recommend keeping detailed records or letting our team handle the arithmetic.
Reporting and paying
You must report residential property gains within 60 days of completion using HMRC’s UK Property Service and pay any CGT at the same time. For other assets, include the gain on your self assessment tax return, due by 31 January following the tax year. Late filing penalties start at £100 and increase rapidly.
HMRC estimates that around 18% of property disposals missed the 60-day deadline in 2024/25 (HMRC, 2025). Missing the window not only incurs penalties but interest too. Understanding what you need to know about CGT deadlines is therefore essential for cashflow planning.
Reducing your CGT bill
Our clients are often surprised by how many reliefs and straightforward planning steps exist. The key is acting early, not weeks after the sale:
- Use both spouses’ allowances: Transfers between spouses are no-gain, no-loss. By moving part-ownership of an asset before sale, you can use two annual exemptions and potentially two lower-rate bands.
- Time disposals: If your income will fall next year, delay the sale so more of the gain is taxed at 10%. Equally, realising losses in the same tax year offsets gains pound-for-pound.
- Shelter gains: Invest through ISAs or pensions to remove future growth from CGT altogether. The ONS reports that households held £316 billion in taxable shares in 2024 (ONS, 2024) – a significant sum that could benefit from wrappers.
- Claim BADR: Business owners who satisfy the two-year ownership and 5% shareholding tests can pay 10% CGT up to a £1 million lifetime cap.
Consider gift relief: Certain business assets or shares can be gifted with the gain deferred until the recipient sells them.
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 essentials
Good records are the backbone of accurate CGT reporting. HMRC can ask for evidence up to 20 years after a disposal. Keep:
- Purchase contracts: Share purchase statements, property completion statements.
- Improvement invoices: Builders’ and architects’ bills.
- Valuations: Especially where you inherited or gifted an asset.
- Sale documents: Completion statements, broker notes.
Digital folders and cloud backups make life easier, and our secure client portal lets you upload everything directly to us. That way, when CGT season arrives, you already have what you need to know about CGT at your fingertips.
Next steps and how we can help
CGT needn’t be a nasty surprise. 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.
