Capital Gains Tax applies when you dispose of an asset for more than you paid for it. The calculation has several steps — this guide walks through each one with worked examples.
For a full overview of Capital Gains Tax including reliefs and exemptions, see Capital Gains Tax UK.
How to Calculate Your CGT — Step by Step
Step 1 — Calculate the Gross Gain
Gain = Proceeds − Acquisition Cost
- Proceeds: what you received for the asset (or its market value if gifted)
- Acquisition cost: what you originally paid (or market value when you acquired it by gift or inheritance)
Step 2 — Deduct Allowable Costs
Allowable costs that reduce the gain include:
- Legal fees on acquisition and disposal
- Estate agent fees on sale
- Stamp Duty Land Tax on acquisition (for property)
- Improvement costs (not maintenance — structural improvements only)
- Enhancement expenditure that adds value to the asset
Net gain = Gross gain − Allowable costs
Step 3 — Deduct the Annual Exempt Amount
Taxable gain = Net gain − £3,000 (annual exempt amount)
If your net gain is £3,000 or less, no CGT is payable.
Step 4 — Determine Your Tax Band Position
Your income tax band determines the CGT rate. For 2026/27:
| Band | Income threshold | CGT rate (all assets post-Oct 2024) |
|---|---|---|
| Basic rate | Up to £50,270 | 18% |
| Higher/additional rate | Over £50,270 | 24% |
If your employment income is £35,000 and your taxable gain is £20,000:
- Basic rate band remaining: £50,270 − £35,000 = £15,270
- First £15,270 of gain taxed at 18% = £2,749
- Remaining £4,730 taxed at 24% = £1,135
- Total CGT: £3,884
Step 5 — CGT on Residential Property (Including Buy-to-Let)
The same rates apply post-October 2024 — 18% (basic rate) and 24% (higher rate). If selling your main home, Private Residence Relief may eliminate the gain entirely.
Worked Examples
Example A — Shares, Basic Rate Taxpayer
- Shares purchased: £8,000
- Shares sold: £22,000
- Dealing costs (both transactions): £300
- Net gain: £22,000 − £8,000 − £300 = £13,700
- Less annual exempt amount: £13,700 − £3,000 = £10,700 taxable
- Income: £28,000 (basic rate taxpayer with room in basic rate band)
- CGT: £10,700 × 18% = £1,926
Example B — Buy-to-Let Property, Higher Rate Taxpayer
- Property purchased: £180,000 (2015); sold: £310,000 (2026)
- SDLT on purchase: £1,200; legal fees (purchase): £1,500; legal fees (sale): £2,000; EA fees: £4,000; extension cost: £15,000
- Net gain: £310,000 − £180,000 − £23,700 = £106,300
- Less annual exempt amount: £106,300 − £3,000 = £103,300 taxable
- Income: £75,000 (higher rate taxpayer throughout)
- CGT: £103,300 × 24% = £24,792
Note: For property sales in England, Wales, and Northern Ireland, CGT must be reported and paid within 60 days of completion. Failure to meet this deadline attracts penalties.
CGT on Inherited Assets
Assets inherited on death are not subject to CGT at the point of inheritance. If you later sell an inherited asset, your cost for CGT purposes is the market value at the date of death (probate value), not the original purchase price.