SPOTLIGHT ON: Capital Gains Tax
What to check before you sell, gift, or transfer an asset.
A little planning before a transaction can make a significant difference to the tax position
Capital Gains Tax can arise in far more situations than simply selling an investment for a profit.
Giving an asset to a family member, transferring ownership, exchanging one investment for another or even selling something for less than its full value can all count as disposals for Capital Gains Tax purposes.
The tax is charged on the gain rather than the total amount you receive. However, what you ultimately pay depends on several factors, including the type of asset, what it originally cost, your income, previous losses, available tax reliefs and who receives the asset.
Timing can make a difference too.
HMRC's latest available annual statistics show that 378,000 taxpayers incurred Capital Gains Tax liabilities of £12.1 billion in 2023/24, based on total taxable gains of £65.9bn. These remain the latest complete annual figures available as at 7 August 2026, with HMRC's next annual statistical release expected later in 2026.
If you're considering selling, gifting or transferring a valuable asset, working out the tax position before committing to the transaction can prevent unexpected bills and identify reliefs that might otherwise be missed.
What counts as a disposal?
Capital Gains Tax, or CGT, generally applies when you dispose of a chargeable asset that has increased in value.
Importantly, a disposal doesn't have to be a conventional sale. It can include selling an asset, giving it away, transferring ownership to somebody else, exchanging one asset for another or receiving compensation for something that has been lost or destroyed.
That means you can potentially create a CGT liability even where you've received little or no cash.
Common chargeable assets include second homes and investment properties, shares held outside an ISA, business interests, land, certain valuable personal possessions and cryptoassets.
Your main home will often qualify for Private Residence Relief, but that exemption isn't automatic in every situation.
The Capital Gains Tax allowance for 2026/27
Individuals have a £3,000 annual exempt amount for 2026/27. This means the first £3,000 of your net chargeable gains for the tax year can normally fall outside CGT. For trusts, the amount is £1,500.
The allowance applies across your taxable disposals for the whole year rather than separately to each asset, and you can't carry an unused annual exempt amount forward.
For example, suppose you make an £8,000 gain on shares and a £2,000 loss on another investment.
Your net gain is £6,000. After deducting the £3,000 annual exempt amount, £3,000 would remain chargeable to CGT, assuming no other gains, losses or reliefs apply.
The reduction in the annual exempt amount over recent years means relatively modest gains can now create a reporting or tax liability.
What are the CGT rates for 2026/27?
For disposals from 6 April 2026, the main CGT rates for individuals are 18% where a gain falls within the available basic rate band and 24% where it falls above it.
Gains qualifying for Business Asset Disposal Relief are taxed at 18%, as are gains qualifying for Investors' Relief.
The standard Personal Allowance remains £12,570 for 2026/27, while the UK basic rate limit used for CGT purposes is £37,700.
Your income and gains interact when determining how much of a taxable gain falls at 18% and how much falls at 24%. Special rules apply when calculating the available basic rate band for Scottish taxpayers.
Someone who is already above the relevant basic rate band will normally pay 24% on taxable gains unless a specific relief provides a different rate. Someone with unused basic rate band may pay 18% on some or all of their gain.
That's why your expected income for the year should form part of any CGT calculation.
Work out the real gain before estimating the tax
CGT doesn't normally apply simply to the difference between what you originally paid and what you receive.
Certain costs can reduce the chargeable gain. Depending on the asset, these may include the original purchase price, Stamp Duty or Stamp Duty Land Tax paid on acquisition, legal and professional fees associated with buying and selling, valuation fees and qualifying expenditure that enhanced the asset's value.
For property, an extension or other capital improvement may qualify, whereas normal repairs and maintenance generally won't. The improvement normally needs to remain reflected in the asset when it is disposed of.
Keeping purchase documents and records of improvement expenditure can therefore make a significant difference many years later.
HMRC expects taxpayers to retain evidence including contracts, receipts, invoices, professional fees and valuations used when calculating gains.
Gifting an asset doesn't automatically avoid CGT
One of the biggest misconceptions around CGT is that giving an asset away avoids tax because you haven't received any money. Usually, it doesn't.
When you give a chargeable asset to another person, HMRC will generally treat the disposal as taking place at its market value on the date of the gift.
The same principle can apply if you deliberately sell an asset for less than it's worth to help the buyer.
Suppose, for example, you bought an investment property for £150,000 and it is now worth £300,000.
Giving the property to an adult child for nothing doesn't normally produce a CGT disposal value of £0. Broadly, the calculation starts by treating you as disposing of it at its £300,000 market value.
The resulting gain then needs to be calculated after allowable costs and any available reliefs.
That can leave you with a tax bill without the cash proceeds that would normally help you pay it.
Transfers to children, grandchildren and other family members should therefore be considered carefully before the gift takes place. Inheritance Tax, Stamp Duty Land Tax and other tax rules may also apply depending on the circumstances, so CGT shouldn't be considered in isolation.
Different rules apply to spouses and civil partners
Transfers between spouses and civil partners who live together generally take place on a no gain/no loss basis for CGT.
The person transferring the asset doesn't normally realise an immediate taxable gain. Instead, the receiving spouse or civil partner effectively inherits the existing CGT history of the asset.
That can create legitimate planning opportunities.
Before selling an investment, for example, couples may want to consider ownership where one spouse has an unused annual exempt amount, capital losses available, more unused basic rate band or already owns a different proportion of the asset.
Any transfer needs to represent a genuine change in beneficial ownership. It should happen before the eventual disposal and shouldn't simply be recorded retrospectively once a sale has been agreed.
It is also important to remember that transferring the asset doesn't eliminate the underlying gain. It changes who owns it and may therefore change how the eventual gain is taxed.
Take care following separation or divorce
Special CGT rules apply when spouses or civil partners separate.
For disposals taking place on or after 6 April 2023, separating spouses and civil partners can generally make no gain/no loss transfers until the earlier of the end of the third tax year after the tax year in which they ceased living together, or the date on which a court grants the divorce or dissolution.
Where assets are transferred under a formal divorce or separation agreement or relevant court order, no gain/no loss treatment can continue without the normal three-year limit.
There are also specific provisions covering the former family home and situations where one party retains a financial interest in a future sale.
The tax position is therefore best considered while the financial arrangements are being agreed, rather than after assets have already changed hands.
Check the position before selling property
An investment property, second home, land or other property that doesn't qualify fully for Private Residence Relief can produce a taxable gain.
Allowable acquisition, disposal and improvement costs should be established before calculating the liability.
If CGT is due on the sale of most UK residential property, it generally needs to be reported and paid within 60 days of completion.
That's considerably sooner than the normal Self Assessment deadline, so property owners should calculate the expected gain and identify the necessary records before completion where possible.
Don't assume your main home is always completely exempt
Private Residence Relief (PRR) means many people pay no CGT when selling their main home. You can only have one PRR residence at a time.
Full relief will normally apply where the property has been your only or main home throughout your ownership, you haven't let part of it out in a way that restricts relief, no part has been used exclusively for business, the property and grounds meet the relevant conditions and you didn't acquire it primarily to make a gain.
More care is needed if you've owned more than one home, let the property for part of your ownership, lived elsewhere for extended periods, used part of it exclusively for business, have significant land or grounds, or changed how the property was occupied over time.
Where a property has qualified as your main residence at some point, the final nine months of ownership will generally qualify for Private Residence Relief even if you were no longer living there. Different provisions can apply for certain disabled people and long-term care home residents.
Letting Relief is also much more restricted than it was historically. It is generally relevant where you shared occupation of the home with a tenant, and relief can be limited to a maximum of £40,000 per owner, subject to the detailed conditions.
Property size can affect relief too
Private Residence Relief normally includes the home and its garden or grounds. The standard permitted area is 0.5 hectares, including the site of the dwelling.
A larger area can sometimes qualify where the character and size of the property make the additional land necessary for the reasonable enjoyment of the residence, but additional conditions apply.
This can become particularly relevant with larger homes, substantial gardens or where part of the land is sold separately from the house.
Review shares and investments before selling
You may have to pay CGT when disposing of shares, unit trusts and other investments held outside tax-exempt wrappers.
Shares held within an ISA don't create a CGT liability when sold. UK Government gilts and certain other investments are also exempt.
Where shares have been accumulated over several years, establishing their CGT cost can involve more than simply looking at the price of the first purchase.
Special identification rules can apply when you buy and sell shares in the same company around the same date. Corporate actions, reorganisations, rights issues and previous transfers between spouses can also affect the base cost.
Before making a substantial disposal, it's worth checking the complete acquisition history rather than relying solely on a current investment-platform statement.
Crypto transactions can create taxable disposals
Cryptoassets are also within the CGT rules for many individual investors.
A disposal can occur when you sell tokens for sterling or another currency, exchange one type of token for another, use cryptoassets to buy goods or services, or give tokens to another person other than a spouse, civil partner or qualifying charity.
Exchanging Bitcoin for another cryptoasset, for example, can create a taxable disposal even though no sterling ever enters your bank account.
Good transaction records become particularly important if you're trading through several exchanges or wallets.
Valuable personal possessions can fall within CGT
CGT isn't restricted to property and investments. Certain personal possessions can become chargeable where their disposal value exceeds £6,000.
Examples include jewellery, paintings, antiques, coins, stamps and collections. Private cars are generally exempt, while certain assets with a predictable useful life of 50 years or less can also qualify for separate exemptions.
Special rules apply when individual items form a set, so dividing a valuable collection into separate transactions doesn't necessarily produce a separate £6,000 limit for each item.
Consider relief before gifting business assets
A gift of a business or shares in a family trading company can create a sizeable gain even where the recipient pays nothing.
Gift Hold-Over Relief may allow qualifying gains to be deferred.
Broadly, the donor doesn't pay CGT immediately on the part of the gain successfully held over. Instead, the recipient takes a reduced acquisition cost, meaning the deferred gain can become taxable when they eventually dispose of the asset.
The relief can apply to qualifying business assets and certain shares, including shares in some unlisted trading companies. A joint claim will normally be required.
This can make the relief useful for family business succession, but it is important to understand that it defers tax rather than necessarily removing it.
A change to the calculation of Gift Hold-Over Relief for certain company shares has been announced to take effect for disposals from 6 April 2027. It doesn't apply to 2026/27 disposals, but anyone planning a business succession extending into the next tax year should review the legislation before proceeding.
Business Asset Disposal Relief changed in April 2026
People selling a business or qualifying shares should also check whether Business Asset Disposal Relief (BADR) applies.
For qualifying disposals made from 6 April 2026, the BADR rate is 18%.
That increased from 14% in 2025/26 and 10% for qualifying disposals on or before 5 April 2025. The lifetime limit on qualifying BADR gains remains £1 million.
Conditions normally need to have been met for at least two years before disposal, so eligibility should be checked well before a business or share sale completes.
Don't forget capital losses
Previous investment losses can reduce a future CGT bill if they've been properly claimed. Allowable losses arising in the same tax year are generally set against gains first.
Unused losses from earlier years can then be used against gains, although the rules are designed so brought-forward losses don't normally reduce gains below the annual exempt amount unnecessarily.
A loss doesn't always have to be claimed immediately. HMRC generally allows a taxpayer to claim an allowable capital loss up to four years after the end of the tax year in which the disposal took place.
Before selling a valuable asset, it's therefore worth checking whether you have previously reported losses available.
The tax year can affect the result
The tax year runs from 6 April to the following 5 April. Where you have control over the timing of a disposal, completing transactions in different tax years can sometimes change the CGT result because each year has its own annual exempt amount and income position.
However, determining the CGT disposal date isn't always as simple as looking at when the money reaches your bank account.
For many transactions completed under an unconditional contract, the date of the contract determines the CGT disposal date, rather than the date payment or completion takes place. That can determine the tax year, applicable rate, available annual exemption and reporting requirements.
For UK residential property, the separate 60-day reporting deadline is generally measured from completion.
Any tax-year planning therefore needs to happen before contracts become binding.
Inheriting an asset produces a different CGT starting point
Death doesn't normally create the same CGT charge as giving an asset away during someone's lifetime.
For CGT purposes, assets inherited from an estate generally use their market value at the date of death as the beneficiary's starting value, subject to the relevant rules and any value agreed for Inheritance Tax purposes.
If the beneficiary later sells the asset, the subsequent gain is broadly calculated by reference to that probate or date-of-death value rather than what the deceased originally paid.
That's a significant distinction between lifetime gifts and inherited assets.
However, Inheritance Tax and wider estate-planning considerations also need to be taken into account, so the CGT result shouldn't determine succession decisions by itself.
What should you check before disposing of an asset?
Before selling, gifting or transferring a significant asset, there are a number of things worth establishing.
You need to know what you originally paid and whether you have evidence, the current market value – particularly for gifts or transfers between connected people – and any allowable acquisition, disposal or improvement costs.
You should also check for previous capital losses, consider your other expected gains and taxable income for the year, and establish whether reliefs such as Private Residence Relief, Gift Hold-Over Relief or Business Asset Disposal Relief could apply.
Ownership can matter too, particularly between spouses and civil partners, as can the precise CGT disposal date.
Finally, consider how the transaction interacts with other taxes such as Inheritance Tax and Stamp Duty Land Tax, whether the 60-day property reporting deadline applies and, importantly, whether you'll have enough cash available to pay the resulting tax.
The best time to consider all of this is before the transaction becomes binding.
Once a sale has completed or an asset has legally changed ownership, many of the planning options that might have been available beforehand may no longer be possible.
Capital Gains Tax should therefore be part of the decision to sell, gift or transfer an asset, rather than something you only think about when it's time to report the transaction.
If you're planning to sell, gift or transfer an asset, speak to me before taking action so we can look at the potential Capital Gains Tax implications while there is still time to plan.
