What is Capital Gains Tax (CGT)?
CGT is a tax on the profit when you sell or otherwise dispose of an asset that has increased in value. You’re taxed on the gain (sale proceeds minus allowable costs and base cost), not the total proceeds. CGT applies to second homes and buy-to-let property, shares/funds, certain crypto assets and business assets. See HMRC’s overview and rates guidance for the current year.
Who pays CGT? Residency really matters
- UK residents are generally taxable on worldwide gains (subject to reliefs/allowances).
- Non-UK residents are taxable on disposals of UK land/property (direct and certain indirect interests) and must report even if no tax is due.
- Temporary non-residents can be brought back into UK CGT on gains realised while abroad if they return within specific windows.
Current CGT rates, bands and allowance (2025/26)
Below is a quick, practical view. Always confirm figures against HMRC on the filing date.
| Category | Rate / Amount | Notes |
|---|---|---|
| Annual Exempt Amount | £3,000 (individuals) | Most trusts: £1,500. Confirm current year before filing. |
| Main asset rates | 18% (basic rate band), 24% (above) | Applies to most chargeable gains since the late-2024 rate change. |
| Residential property | 18% / 24% | Non-PRR property. Rate split depends on remaining basic-rate band. |
| Trusts | Up to 24% | Trust AEA generally £1,500; special rules may apply. |
Sources for rates/allowance and worked examples: HMRC “Rates and allowances” (including 2025/26 examples) and SA108 Notes (2025).
Property and CGT: main residence vs. second home, and overseas property
- Private Residence Relief (PRR) can exempt gains for periods a property was your main home; letting relief is now limited.
- Second homes / buy-to-let fall under the 18%/24% regime.
- Overseas property owned by UK residents is generally within UK CGT; you may also owe tax locally — treaty relief can prevent double taxation.
- Non-residents must report UK property disposals and pay within the deadline even if no CGT is due.
Reporting deadlines and the 60-day UK property rule
| Scenario | Deadline | How to report |
|---|---|---|
| UK residential property disposal | Within 60 days of completion | Use HMRC’s online CGT on UK property service; pay on account. |
| Other assets (shares, funds, crypto, etc.) | By 31 January following the tax year (via Self Assessment) | Include on SA return; pay by 31 January. Confirm payments on account as applicable. |
| Non-resident disposal of UK property | Within 60 days of completion | Report and pay via HMRC’s non-resident route even if no tax is due. |
How gains are calculated (and commonly missed deductions)
Taxable gain = sale proceeds − purchase price − allowable costs (acquisition fees, selling fees, capital improvements) − your Annual Exempt Amount. Then apportion between 18% and 24% by reference to your remaining basic-rate band. Worked examples on HMRC.
Don’t miss: professional fees, enhancement costs (extensions, structural work), and incidental costs of acquisition/disposal.
Planning levers for private clients
- Timing across tax years — split disposals so more gain is taxed at 18% and to use multiple Annual Exempt Amounts (and between spouses/civil partners).
- Spouse/civil partner transfers — usually no gain/no loss; can rebalance ownership to utilise both allowances and rate bands.
- Loss harvesting — crystallise losses to offset current or future gains.
- Cross-border treaty relief — match overseas tax to UK CGT to prevent double taxation (Spain/Portugal/Italy frequently arise for our clients).
- Temporary non-residence — plan carefully; anti-avoidance can bring gains back on return.
- FX management — for foreign currency assets, manage sterling exposure so market moves don’t erode after-tax outcomes. Our FX forward guide explains locking rates ahead of completion.
Worked scenario: UK resident selling a second home
A higher-rate UK taxpayer sells a UK second home. After allowable fees and improvements, the net gain is £120,000. Deduct the £3,000 allowance ⇒ £117,000 taxable. If no basic-rate band remains, the entire £117,000 falls at 24%, giving £28,080 CGT (illustrative only; confirm your bands/year before filing). HMRC’s examples show how to split gains where some basic-rate band remains.
Key takeaways
- CGT has become more material as allowances fell and enforcement tightened; 60-day UK property reporting is critical.
- Know your residency and treaty position before selling.
- Use timing, spousal planning, losses, and FX tools to manage outcomes.
- For large or cross-border disposals, coordinate with tax/legal advisors early; we can orchestrate the full plan.
Useful Tables
| Cost Type | Usually Allowable? | Examples / Notes |
|---|---|---|
| Acquisition & Sale Fees | Yes | Agent, legal, survey, stamp duties/transfer taxes (jurisdiction dependent). |
| Capital Improvements | Yes | Extensions, structural works (not routine maintenance). |
| Financing Costs | No (generally) | Interest and routine mortgage costs are usually not part of base cost. |
| Maintenance & Repairs | No | Ongoing upkeep is normally not enhancement expenditure. |
| Planning Lever | When It Helps | Coordination Needed |
|---|---|---|
| Timing Across Tax Years | Large gains that can be split; maximise AEA and bands. | Personal tax adviser; cash-flow/FX planning. |
| Spousal Rebalancing | Use both AEAs / rate bands before disposal. | Legal advice for transfers; filing positions. |
| Loss Harvesting | Offset current or future gains; tidy historic losses. | Tax compliance and record-keeping. |
| Treaty Relief | Overseas real estate or shares taxed abroad. | Cross-border tax specialist; evidence of foreign tax paid. |
| FX Forwards | Foreign currency assets; protect GBP value to completion. | Lucid Financial Markets Team |