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Capital Gains Tax (CGT) is one of those taxes that can catch you off guard – especially when selling property, shares, or valuable personal assets. But understanding CGT is essential for effective financial planning as it can help you to minimise your tax liability, make smarter decisions about when and how to sell assets, and make sure you’re in full compliance with tax laws.
Simon Hurren, Private Client Tax Partner talks us through what you need to know about CGT so that whether you’re selling a second home, valuable personal possessions or shares and investments – you can plan ahead to optimise your tax position.
Why it Matters?
Understanding CGT allows individuals, sole traders and partnership businesses to plan asset disposals strategically, potentially saving thousands in tax and aligning with long-term financial goals.
What is Capital Gains Tax?
Capital Gains Tax is a tax on the profit (or “gain”) made when you sell or dispose of an asset that has increased in value. It’s not the amount you sell the asset for, but the gain you make that’s taxed.
How is CGT Different from Other Taxes?
Unlike income tax, which is based on earnings such as wages or dividends, CGT applies to individuals, sole traders and partnership business owners if and when you realise a profit from selling certain assets. It’s a one-off tax triggered by a “disposal” – which means a sale, gift, or exchange of an asset.
How Much is Capital Gains Tax?
Current CGT Rates and Thresholds (2025/26)
The annual tax-free allowance for individuals is now £3,000 (reduced from £6,000 in April 2024).
The rate you’ll pay on anything beyond this then depends on your overall taxable income and the type of asset being sold. As a guide:
Basic rate taxpayers pay 18% on residential property and gains from other chargeable assets. Although this is only the case up to the remaining basic rate band.
Higher/additional rate taxpayers will pay 24% on most assets and on residential property (reduced from 28% in October 2024).
Example Calculation
So, if you’re a higher-rate taxpayer who sells shares for a £20,000 gain:
- Deduct £3,000 allowance = £17,000 taxable gain
- CGT at 24% = £4,080 owed
When is Capital Gains Tax Due?
For UK residential property you’ll need to pay within 60 days of sale. For other assets you’ll pay via Self-Assessment by 31 January following the tax year.
What you pay Capital Gains Tax on?
Capital Gains Tax on Property
Residential property gains are taxed differently to other assets.
But there are some reliefs and exemptions that may apply such as Private Residence Relief, Business Asset Disposal Relief, and ISA gains.
- Private Residence Relief: If the property was your main home, part or all of the gain may be tax-free.
- Letting Relief: May be available if you rented the property out while it was your main home.
For example, if you sell your second home and realise a gain of £50,000:
- After £3,000 exemption, you owe tax on £47,000
- As a higher-rate taxpayer you’ll pay 24% on £47,000 = £11,280
UK Specific Rules
CGT applies to UK residents and, in some cases, non-residents disposing of UK assets (especially property). Non-residents are still required to report any gains on UK property within 60 days.
Can I reduce my Capital Gains Tax bill?
There are some allowances, exemptions and strategies you can use to reduce the amount of Capital Gains Tax that you pay.
For example:
Utilising your Tax-Free Allowance by selling assets incrementally may help you avoid exceeding the threshold. Timing the sale of assets across tax years and perhaps delaying a disposal until the next tax year if you’re close to the higher rate threshold.
Making use of Business Assets Reliefs such as Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) may reduce CGT to 10%. Although this will change to 14% from 6 April 2025 and 18% from 6 April 2026.
Consider Residential Property rules and apply for Private Residence Relief where applicable.
Plan ahead for the 60-Day reporting rule to avoid late payment penalties.
Use Tax-Efficient Investments such as ISAs where gains are tax-free.
We’re here to help
Capital Gains Tax is a key component of both personal and business financial planning.
But navigating it can be complex, especially when dealing with property, business assets, trusts or multiple disposals.
Our professional advice helps you understand the rules to optimise your tax position and avoid pitfalls, saving you money and ensuring peace of mind.
To find out more about how we can support your individual circumstances, get in contact with one of the tax team by calling 0330 058 6559 or by emailing hello@scruttonbland.co.uk
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