How capital gains are linked with Income Tax is important to understand as your overall income position affects the Capital Gains Tax (CGT) rate you pay.
CGT interacts directly with your Income Tax band. Your taxable income is first calculated after deducting your Personal Allowance and any Income Tax reliefs. Your chargeable capital gains are then added on top, after subtracting the annual tax-free CGT allowance (2026-27: £3,000). This determines whether your gains fall within the basic or higher rate Income Tax band, which determines the CGT rate that applies.
For individuals in the higher or additional rate Income Tax band, capital gains are usually taxed at 24% from 6 April 2026. Basic rate taxpayers will initially pay CGT at a rate of 18% but this increases to 24% for any amount of chargeable gain above the basic Income Tax band.
Gains on certain assets are treated differently. Gains on business assets may qualify for Business Asset Disposal Relief at a rate of 18% and most people do not pay CGT when selling their main home. Trustees and personal representatives typically pay a flat 24% CGT rate.
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