Capital gains tax explained

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How a gain is worked out

1. Take the sale proceeds. The amount you sold the asset for, or its market value if given away.
2. Deduct the cost. What you paid for it, plus buying and selling costs and qualifying improvements.
3. Apply the annual exempt amount. The first £3,000 of total gains in the year is tax free.
4. Apply the rate. 18% within your basic rate band, 24% above it, based on your total income and gains.

The reliefs that reduce it

Several reliefs can cut or remove the bill. Private Residence Relief usually removes the gain on your main home. Business Asset Disposal Relief gives a reduced rate on qualifying business sales. Transfers between spouses and civil partners are normally free of tax, which can double the annual exempt amount available.

Where the real money is won: timing and ownership

Most capital gains tax planning is not clever structuring. It is two mundane decisions taken early enough to matter, when to sell and whose name is on the asset.

Timing first. The annual exempt amount is £3,000 per person per tax year and it cannot be carried forward. Sell a portfolio with a £12,000 gain entirely in March and you use one year's exemption. Sell half in March and half in late April, either side of 5 April, and you use two, saving up to £2,160 at the 24% rate for the cost of a fortnight's patience. The same thinking applies to which tax year absorbs a gain at all. If you know next year's income will be lower, perhaps retirement or maternity leave is coming, a gain deferred into that year may fall into the 18% band instead of 24%.

Ownership second. Transfers between spouses and civil partners carry no tax, and the recipient inherits the original cost. A buy to let bought for £150,000 in one name and now worth £250,000 can have a half share moved across before sale. The gain is then split between two people, two exemptions apply, and each partner's own tax band decides the rate on their half. Where one partner is a basic rate taxpayer, that single step is regularly worth £6,000 or more on a property sale, and it costs a solicitor's transfer form. It must be genuine, unconditional and done before any binding sale contract, which is why leaving it until the buyer is found is too late.

Losses are a use it or lose it asset

Losses of the same year set off against gains automatically, even wastefully against gains that would have been covered by the exemption anyway. Losses from earlier years are different, they only come off gains above the exemption, but they must have been claimed. A loss is not claimed by doing nothing. It goes on a tax return, or in a letter to HMRC, within 4 years of the end of the tax year it arose. The classic casualty is the person who lost money on shares or crypto years ago, never reported it because there was nothing to pay, and now faces a property gain the old loss could have sheltered. If you have any disposal at a loss sitting unreported inside the last 4 years, claim it now, while it still exists.

Business owners: the relief that keeps shrinking

Business asset disposal relief once taxed a qualifying business sale at 10%. The rate went to 14% for disposals from 6 April 2025 and sits at 18% for disposals from 6 April 2026, against a lifetime limit of £1 million of gains. The conditions still repay attention, broadly 2 years of trading, 5% shareholding, and employment or office in the company, tested through the period before sale. At 18% against a main rate of 24%, the relief is worth up to £60,000 on a full £1 million, meaning the sequencing of a company sale, and whether spouses both qualify, still matters, but the days of structuring everything around a 10% exit are over. Sale negotiations that began under the old rates and completed after April 2026 caught several sellers out, because the rate is set by the date of the binding contract, not the date the deal was agreed in principle.

How the payment actually happens

Two different systems run side by side and they confuse people every January. A UK residential property gain must be reported and the tax paid within 60 days of completion on its own standalone return. Everything else, shares, crypto, business assets, overseas property, waits for the Self Assessment return and the ordinary 31 January deadline. The property gain then has to be entered again on the annual return, with the tax already paid credited, and the estimate trued up against your actual income for the year. Missing the second entry, or paying twice because the credit was not claimed, are both common and both avoidable.

Frequently asked questions