Capital Gains Tax Allowance 2026/27 — Rates, Thresholds, and How to Calculate

Capital Gains Tax (CGT) is charged on the profit you make when you sell or dispose of an asset that has increased in value. It applies to a wide range of assets — shares, investment funds, cryptocurrency, second properties, and business interests — but not to your main home, ISA investments, or pension savings.

The CGT picture for 2026/27 looks very different from just a few years ago. The annual exempt amount — the tax-free allowance on capital gains — was slashed from £12,300 in 2022/23 to just £3,000. This reduction means many more people now have a tax liability when they sell investments or property, even on relatively modest gains. Understanding the rules and planning around them has become significantly more important.

For the wider PocketWise overview of property, shares, calculators and reliefs, use the main Capital Gains Tax hub.

CGT Annual Exempt Amount

The annual exempt amount is the threshold of gains below which you pay no CGT in a given tax year. It resets every April and cannot be carried forward — if you do not use it, you lose it.

The allowance has been cut dramatically in recent years as part of a government drive to raise revenue from capital gains. In 2022/23, it stood at £12,300. By 2024/25 it had been reduced to £3,000 — a 76% reduction — and it has remained at that level since.

The first £3,000 of capital gains you make in the 2026/27 tax year is tax-free. Only gains above this amount are taxed. Each individual — including spouses and civil partners — has their own exempt amount.

CGT Rates for 2026/27

The rate of CGT you pay depends on two things: the type of asset you are selling and your total taxable income. Residential property (such as a second home or buy-to-let) is taxed at higher rates than other assets because the government has specifically chosen to tax property gains more heavily.

For other assets — shares, funds, ETFs, cryptocurrency, and most other investments — the rates are 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers. Note that your income determines your CGT rate, not just your gains — so a large gain can effectively be taxed at higher rates even if your normal income is modest.

Business Asset Disposal Relief (BADR) — formerly Entrepreneurs’ Relief — reduces the rate to 10% on gains from the sale of qualifying business assets. There is a lifetime limit of £1 million of qualifying gains, meaning you can use BADR on up to £1 million of business gains over your lifetime. After 2024 Budget changes, the BADR rate will remain at 10%, but the lifetime limit applies.

How to Calculate Your CGT

The starting point for any CGT calculation is identifying your gain — that is, the difference between what you received for an asset and what it cost you. Crucially, you can deduct certain costs, including the fees you paid when you bought and sold the asset, any stamp duty paid on purchase, and the cost of capital improvements (for property).

You cannot deduct maintenance costs or running costs — only costs that genuinely added to the value of the asset. For shares, dealing fees charged by your broker can be deducted.

Example: Selling Shares

Consider someone who bought shares for £15,000 and sold them for £25,000. The dealing fees to buy and sell came to £50. Their CGT calculation looks like this:

Example: Selling a Second Home

Property gains are more complex because of the higher tax rates and the additional costs typically involved. Someone who bought a second home in 2015 for £200,000 and sold it for £300,000 might face a calculation like this:

Note that on property, even basic rate taxpayers pay 18% — not the standard 10% that applies to shares. This is a significant difference worth remembering if you are planning a property disposal.

Which Rate Do You Pay?

The rate you pay is determined by adding your capital gain to your other taxable income. If the total exceeds the higher rate threshold of £50,270, the portion of the gain above that threshold is taxed at the higher CGT rate.

This means someone with a relatively modest income could still pay the higher CGT rate on part of their gain if the gain itself is large enough.

Split Rate Example

Someone earning £45,000 who makes a £10,000 gain on shares would fall into a split-rate position:

Assets Exempt from CGT

Not all asset sales trigger a CGT liability. A number of important exemptions exist, and knowing about them matters particularly when it comes to the largest financial decisions people make.

The most important exemption is the sale of your main home. Private Residence Relief (PRR) means the gain on your principal home is completely free of CGT, subject to conditions. The home must have been your main residence for the full period of ownership, or for a qualifying portion of it. If you have only one home and live in it throughout, you will pay no CGT when you sell.

ISA and pension wrappers are the other crucial exemptions. Any investments held within a Stocks and Shares ISA, Lifetime ISA, or pension are entirely outside the scope of CGT. This is a compelling reason to use these wrappers for long-term investing.

How to Reduce Your CGT Bill

With the annual exempt amount now just £3,000, CGT planning has become much more relevant for anyone with significant investments outside an ISA or pension. A number of legal strategies can materially reduce your bill.

Use your annual exempt amount every year. The £3,000 allowance cannot be carried forward. If you have unrealised gains in a portfolio, consider crystallising up to £3,000 of gains each tax year to use the allowance before it resets. This is a simple, repeatable strategy that can significantly reduce cumulative CGT over time.

Transfer assets to your spouse before selling. Transfers between spouses and civil partners are CGT-free. Each person then has their own £3,000 exempt amount and their own tax rate. If one partner is a basic rate taxpayer and the other is not, transferring before selling can save substantial tax.

Use your ISA allowance to move investments into a tax-free wrapper. The “bed and ISA” technique involves selling investments from a general dealing account and immediately buying them back inside an ISA. You crystallise a gain (and may owe some CGT), but future gains within the ISA will be permanently tax-free.

Offset capital losses against gains. If you have made losses on other investments, these can be deducted from your gains before tax is calculated. Losses in the current year are used first, then losses carried forward from prior years. You must report losses to HMRC — they are not automatic.

Reporting and Paying CGT

The reporting rules for CGT depend on what type of asset you have sold. For residential property, the rules are particularly strict — you must report and pay any CGT within 60 days of completing the sale, or face penalties and interest.

For shares and other assets, CGT is reported through Self Assessment — you declare gains made in the 2026/27 tax year on your 2026/27 tax return, which must be filed and paid by 31 January 2028.

You must report to HMRC even if your total capital gains for the year are below £3,000 (the exempt amount) if your total proceeds exceed £50,000. This catches people who sell large amounts of shares at a small profit — for example, someone who inherits a portfolio and sells it.

How to Report

HMRC has a dedicated online service for property CGT called the “CGT on UK Property” account. For all other assets, gains are declared through Self Assessment on the Capital Gains summary pages.

Key Thresholds to Remember (2026/27)

Useful Links

• CGT on Second Homes
• How to Avoid Inheritance Tax Legally
• Inheritance Tax Threshold 2026
• Self-Assessment Guide
• ISA Allowance 2026/27
• Stocks and Shares ISA Guide
• Buy-to-Let Tax Guide
• Gifting Money Tax Rules