Capital Gains Tax (CGT) is a tax on the profit you make when you sell or dispose of an asset that has increased in value. It is the gain itself that is taxed, not the total amount you receive. For example, if you buy shares for £3,000 and sell them for £8,000, the taxable gain is £5,000.
CGT typically applies when you dispose of shares or other investments. Examples of assets or gains that are generally exempt from CGT, including investments held within ISAs or PEPs, UK government gilts and Premium Bonds, gambling winnings and carried interest (from 6 April 2026). A disposal includes selling, gifting, exchanging or receiving compensation for an asset. If you jointly own investments, you are taxed only on your share of any gain.
You only pay CGT on total gains above your annual tax-free allowance, which is currently £3,000. If your gains exceed the allowance, you must report and pay CGT. This is usually completed by filing a self-assessment tax return, with different reporting deadlines depending on the type of asset sold or gifted.
The rate of tax depends on your income. Basic rate taxpayers pay 18% CGT on gains within the basic rate band and 24% on amounts above it. Higher and additional rate taxpayers generally pay 24% CGT on all gains.
Losses on investments can be used to reduce gains, and other reliefs may also be available. It is important to keep records of purchase costs, sale proceeds and other associated fees to calculate the correct taxable amount.
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