Capital Gains Tax in 2025/26 — What You Need to Know

Capital Gains Tax (CGT) is charged on the profit you make when you dispose of an asset that has increased in value. You don't pay CGT on everything — your main home (if it qualifies for Private Residence Relief), ISA holdings, and Premium Bonds are all exempt. But property you rent out, shares held outside an ISA, second homes, and business assets are all potentially chargeable.

The 2025/26 CGT rates reflect changes made in the October 2024 Autumn Statement, and further changes are scheduled for business assets from April 2026. Using our asset builder above, you can add each disposal individually — including the purchase date, sale date, buying and selling costs, improvement costs, and Private Residence Relief — and get a full picture of your CGT position for the year.

CGT Rates 2025/26

The £3,000 Annual Exempt Amount

Every UK taxpayer has an annual CGT exemption — currently £3,000 for 2025/26. This means the first £3,000 of net gains in a tax year is completely free of CGT. It cannot be carried forward to future years if unused, and it cannot be transferred to a spouse (though spouses each have their own separate £3,000 allowance).

The allowance was dramatically reduced in recent years — from £12,300 in 2022/23 to £6,000 in 2023/24, then to £3,000 from 2024/25. This has significantly increased CGT bills for people who previously relied on the allowance to shelter smaller gains.

Private Residence Relief (PRR) Explained

If you are selling a property that was at some point your main home, you may be entitled to Private Residence Relief on the proportion of your ownership during which it was your principal private residence. PRR eliminates CGT on that proportion of the gain completely.

The formula is: Relief = Total Gain × (Qualifying Months ÷ Total Months Owned). Qualifying months include the actual period of occupation as a main residence, plus always the final 9 months of ownership — regardless of whether you were living there at the time.

Allowable Costs — What Can You Deduct?

Your CGT gain is not simply proceeds minus purchase price. You can deduct the following from your proceeds to reduce your gain:

• Original purchase price or market value if inherited/gifted
• Buying costs: stamp duty, solicitor fees, survey costs, agent fees paid on purchase
• Selling costs: estate agent fees, solicitor fees, auctioneer fees on disposal
• Improvement costs: capital expenditure that enhanced the property (extensions, loft conversions, conservatories) — not repairs, redecorations or maintenance
• For shares: dealing charges, broker fees, and the cost of rights issues

Our asset builder collects all of these items separately so your cost basis is correctly calculated.

Losses and How They Work

If you make a loss on a disposal, it can be set against gains made in the same tax year. Unlike the annual exempt amount, losses are carried forward to future years — indefinitely — if they cannot be fully used in the year of disposal. They must be claimed within 4 years of the end of the tax year in which they arose.

Importantly, losses are applied after the annual exempt amount — you must use your £3,000 exemption first, then losses reduce the remaining taxable gain. If losses would reduce your gain below zero in the same year, only the amount needed to bring it to zero is applied; the remainder carries forward.

Business Asset Disposal Relief (BADR)

Formerly known as Entrepreneurs' Relief, BADR reduces the CGT rate on qualifying business asset disposals to a flat 14% in 2025/26 (rising to 18% from 1 April 2026). The lifetime limit remains £1 million of gains. To qualify, you must have owned the business asset for at least 2 years and meet various conditions relating to the nature of the business and your interest in it. BADR eligibility is complicated — always take specialist tax advice.

Reporting and Payment

For UK residential property: CGT must be reported and paid within 60 days of the completion date using HMRC's online Capital Gains Tax service. This is a strict deadline — penalties and interest apply for late filing even if you are also filing a Self Assessment return.

For all other assets: CGT is reported via your annual Self Assessment tax return, due by 31 January following the end of the tax year. The tax is payable by the same date.

Transferring Assets to a Spouse or Civil Partner

Transfers between spouses or civil partners who are living together are exempt from CGT — the recipient takes on the transferor's original cost basis and acquisition date. This is a powerful planning tool: by transferring assets to a lower-rate or non-taxpayer spouse before disposal, or by splitting ownership to utilise two annual exemptions (£6,000 combined in 2025/26), you can significantly reduce a CGT bill.