How to Calculate Capital Gains Tax in the UK: A Complete Guide for 2025/26

Capital gains tax applies when you sell or dispose of an asset for more than you paid for it. The tax is charged on the gain, not the full sale proceeds, and every UK taxpayer has an annual exemption that shields the first £3,000 of gains in 2025/26. With the allowance now a fraction of what it was a few years ago, more investors and property owners are finding themselves with a CGT bill to calculate and pay.

This guide walks through the calculation step by step, covers the current rates for shares and property, explains how your income tax band affects the rate you pay, and shows worked examples you can follow. Use our capital gains tax calculator to estimate your liability on any disposal using current 2025/26 rates.

The basic CGT calculation formula

The starting point for every CGT calculation is the gain. Gain equals disposal proceeds minus allowable costs. Allowable costs include the original purchase price, stamp duty and legal fees on acquisition, improvement costs that added value to the asset, and selling costs such as estate agent fees and solicitor fees on disposal. The formula is straightforward: proceeds minus base cost equals chargeable gain before reliefs and exemptions.

Once you have the gain, you deduct the annual exempt amount of £3,000 for 2025/26. If your total gains for the tax year are below £3,000, you owe no CGT. If gains exceed £3,000, only the excess is taxable. You then apply the appropriate CGT rate based on your income tax band and the type of asset disposed of.

CGT rates for 2025/26

CGT rates depend on the type of asset and whether the taxable gain falls within your remaining basic rate income tax band. For most chargeable assets including shares, funds, and personal possessions, the rates are 18% for gains within the basic rate band and 24% for gains above it. For residential property that is not your main home, the same 18% and 24% rates apply from April 2024 onwards.

The basic rate income tax band for 2025/26 extends to £50,270 of taxable income. To determine which CGT rate applies, you add your taxable gains to your taxable income for the year. The portion of the gain that fits within the remaining basic rate band is taxed at 18%. Any portion that pushes you above £50,270 is taxed at 24%.

For a deeper look at the annual allowance and how it has changed, see our guide on the capital gains tax allowance for 2025/26.

Worked example: CGT on shares

James bought shares for £15,000 in 2019 and sold them for £28,000 in 2025/26. His allowable costs on purchase were £200 in dealing fees. On sale, dealing fees were £150. His gross gain is £28,000 minus £15,000 minus £200 minus £150, which equals £12,650.

After deducting the £3,000 annual exempt amount, his taxable gain is £9,650. James has taxable income of £38,000 from employment, leaving £12,270 of basic rate band remaining (£50,270 minus £38,000). The entire £9,650 gain falls within the basic rate band, so he pays 18% CGT: £9,650 multiplied by 18% equals £1,737.

If James had taxable income of £48,000 instead, only £2,270 of basic rate band would remain. The first £2,270 of his gain would be taxed at 18% (£409), and the remaining £7,380 at 24% (£1,771). Total CGT would be £2,180. This illustrates how employment income directly affects the CGT rate on investment gains.

Worked example: CGT on investment property

Priya bought a buy-to-let flat for £180,000 in 2015, including £2,500 stamp duty and £1,200 legal fees. She spent £8,000 on a new kitchen in 2019. She sold the property for £265,000 in 2025/26, with estate agent fees of £3,500 and legal fees of £1,800 on disposal.

Her base cost is £180,000 plus £2,500 plus £1,200 plus £8,000, totalling £191,700. Disposal costs are £3,500 plus £1,800, totalling £5,300. Net proceeds are £265,000 minus £5,300, equalling £259,700. Gross gain is £259,700 minus £191,700, which equals £68,000.

Priya has no private residence relief as the property was never her main home. After the £3,000 annual exempt amount, her taxable gain is £65,000. With employment income of £42,000, she has £8,270 of basic rate band remaining. The first £8,270 is taxed at 18% (£1,489) and the remaining £56,730 at 24% (£13,615). Total CGT is £15,104.

Property disposals have additional reporting requirements. Priya must report and pay the CGT within 60 days of completion via HMRC's Capital Gains Tax on UK Property service. Our guide to capital gains tax on UK property covers the 60-day rule, private residence relief, and lettings relief in detail.

What counts as allowable costs

Allowable costs reduce your gain and therefore your CGT bill. On acquisition, you can include the purchase price, stamp duty land tax, legal and survey fees, and any costs of improving the asset that remain reflected in its value at disposal. Routine maintenance and repairs do not count as improvement costs.

On disposal, you can deduct estate agent fees, solicitor fees, and any other costs directly associated with the sale. For shares, dealing charges on both purchase and sale are allowable. For property, marketing costs and auction fees are also deductible if applicable.

Costs you cannot deduct

Mortgage interest, insurance premiums, and general upkeep costs on investment property cannot be deducted from the gain for CGT purposes. These may be deductible against rental income under income tax rules, but they do not reduce the capital gain on disposal. Loan repayment itself is not an allowable cost because it is a return of capital, not an acquisition or disposal expense.

The £3,000 annual exempt amount

Every UK taxpayer has an annual CGT exemption of £3,000 for 2025/26. Gains up to this amount are free from CGT regardless of the asset type. The exemption applies to total gains across all disposals in the tax year, not per asset. If you sell three different shareholdings with gains of £1,500, £1,200, and £800, your total gain is £3,500 and £500 is taxable after the exemption.

The exemption cannot be carried forward. If you realise no gains in a tax year, the unused allowance is lost. Spreading disposals across two tax years to use two separate £3,000 exemptions is a legitimate planning strategy. Married couples and civil partners each have their own exemption, and transfers between spouses are made at no gain, no loss, allowing couples to use both exemptions effectively.

How income tax bands affect your CGT rate

CGT does not have its own rate bands independent of income tax. Instead, your taxable income for the year determines how much of your basic rate band remains available for gains. A higher rate taxpayer with taxable income above £50,270 pays 24% on all gains above the £3,000 exemption. A basic rate taxpayer may pay 18% on all gains if their income plus gains stay within the basic rate band.

This interaction matters for timing. If you plan to sell an asset with a large gain, selling in a year when your employment income is lower may keep more of the gain within the 18% band. Retiring, taking a career break, or selling in a year with lower bonus income can reduce the CGT rate on the same absolute gain.

Private residence relief for your main home

Your main home is generally exempt from CGT under private residence relief, provided you lived in it as your main residence throughout your period of ownership. The last nine months of ownership always qualify for relief even if you have moved out. This is why most homeowners can sell their main residence with no CGT liability even after significant price appreciation.

If you let part of your home or used it partly for business, relief may be restricted. If you have more than one property, you can nominate which is your main residence for CGT purposes, but the nomination must be made within two years of acquiring the second property. Properties that were ever your main residence but are now let out may qualify for partial relief based on the proportion of time lived in versus let.

Reporting and paying CGT

For residential property disposals, you must report and pay estimated CGT within 60 days of completion using HMRC's online service. This applies even if the gain is below the annual exempt amount or fully covered by private residence relief, though no tax may be due in those cases. Failure to report within 60 days can result in penalties and interest.

For shares and other non-property assets, gains above the annual exempt amount must be reported on your Self Assessment tax return. The deadline for online Self Assessment is 31 January following the end of the tax year. CGT on shares is due by the same date. If you do not normally file a tax return, you may need to register for Self Assessment when you have chargeable gains.

Strategies to reduce your CGT bill

Several legitimate strategies can reduce CGT. Using both spouses' £3,000 exemptions by transferring assets before sale is straightforward and effective. The bed and ISA strategy involves selling investments outside an ISA, crystallising gains within the annual exemption, and repurchasing inside an ISA to shelter future growth. Spreading disposals across tax years uses multiple annual exemptions.

Harvesting losses is equally important. If you have investments sitting at a loss, selling them in the same tax year as profitable disposals offsets the gains. Losses must be reported to HMRC and can be carried forward to future years if not fully used. Timing disposals to coincide with lower income years keeps more of the gain in the 18% band.

For property investors, understanding private residence relief and the interaction between periods of owner occupation and letting is essential. Even a short period living in a property before letting it can significantly reduce the CGT bill on eventual sale. Model your specific scenario in the capital gains tax calculator before committing to a disposal, and seek professional advice for complex cases involving multiple properties or partial relief claims.