Written by Jordan Reeves · Reviewed by Naomi Hartley, CPA
UK Capital Gains Tax: Rates, the £3,000 Allowance, and How to Shelter Gains
Capital Gains Tax is charged when you sell an asset for more than you paid — shares, funds, a second property, crypto. The bit that's changed everything is the allowance: it's been cut from £12,300 to £3,000 in two years, dragging ordinary investors into CGT for the first time. Here's how it works, and how to legally keep gains out of its reach.
- The answer: CGT applies to gains over the £3,000 annual exemption, at 18% within your basic-rate band and 24% above it.
- The shift: the allowance was £12,300 in 2022-23, so gains that were once tax-free now generate a bill.
- The defence: ISAs and pensions are CGT-free, spouses double the allowances and bands, and losses offset gains — use them deliberately.
Where the AI summary above gets this wrong
"You can make up to £3,000 of capital gains tax-free each year, and above that you pay 10% or 20%."
The allowance is right; the rates are out of date after the October 2024 Budget:
- The main rates are now 18% and 24%, not 10% and 20% — the lower rates for shares were raised in October 2024 to match property, so older summaries undercount the bill.
- Your gain stacks on top of your income — it's the gain's position relative to the £50,270 higher-rate threshold, not your salary alone, that sets whether you pay 18% or 24%.
- The allowance collapse is the real story — at £3,000 it's a quarter of what it was, so "most people won't pay CGT" is no longer true.
01 What's taxed, and what isn't
You pay Capital Gains Tax on the profit when you dispose of most assets, not on the whole proceeds. That covers shares and funds held outside a tax wrapper, second homes and buy-to-lets, business assets, and crypto. Crucially, several big things are exempt: your main home under Private Residence Relief, anything inside an ISA or pension, UK government gilts, personal possessions worth under £6,000, and assets you give to a spouse or civil partner.
So the question is rarely "do I have a gain?" but "is the gain in a wrapper that shelters it?" Money inside an ISA or pension never troubles CGT at all, which is what makes those wrappers the first line of defence.
Source: GOV.UK — Capital Gains Tax
02 The rates and how they stack
The rate depends on where the gain sits once it is stacked on top of your income, which means the same gain can be taxed at two different rates in the same year.
After deducting the £3,000 annual exempt amount, the part of the remaining gain that falls within your unused basic-rate band is taxed at 18%, and anything above the £50,270 higher-rate threshold at 24%. The same rates now apply to shares and to residential property, which removed a long-standing distinction.
Working an example through makes the stacking clear. Someone with £40,000 of income and a £20,000 gain has £10,270 of basic-rate band left. After the £3,000 exemption, £17,000 of gain remains: £10,270 of it is taxed at 18% and the other £6,730 at 24%. The blended rate is about 20% — not the 24% a quick look at the table would suggest, and not the 18% the taxpayer was hoping for.
That stacking is also what makes timing valuable. A gain realised in a year when your income is low can fall largely into the basic-rate band, and a gain split across two tax years uses two annual exemptions as well as two basic-rate bands.
Capital Gains Tax due
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Source: GOV.UK — Capital Gains Tax rates
03 How to shelter gains legally
Every legitimate way to cut a Capital Gains Tax bill is a relief the system deliberately provides rather than a loophole, and there are four worth knowing.
Hold growth investments inside an ISA or a pension, where gains fall outside CGT entirely and are never reported. This is the only one of the four that removes the problem rather than managing it.
Use the £3,000 exemption every year. It does not carry forward, so an unused one is simply lost at 5 April — and for a portfolio with accumulated gains, realising £3,000 of gain annually and reinvesting resets the base cost a little at a time, at no tax cost.
Transfer assets to a spouse or civil partner before selling. Transfers between them are at no gain and no loss, so the receiving spouse inherits your base cost, and the eventual sale uses their exemption and their bands. For a couple this effectively doubles the annual exemption to £6,000.
And offset losses. Losses realised in the same year are set against gains before the exemption is applied; unused losses can be carried forward indefinitely, provided they are reported to HMRC within four years of the tax year in which they arose. That reporting requirement is the part people miss, and an unreported loss is not available later.
Moving existing holdings into an ISA without triggering a large gain in one go is its own manoeuvre, covered in Bed and ISA.
04 Reporting and deadlines
The deadlines differ sharply by asset, and the property one catches people out repeatedly.
If you dispose of UK residential property at a gain, you must report it and pay the tax within 60 days of completion, through HMRC's dedicated online service — not through your annual return. Penalties and interest start accruing from day 61, and the obligation exists even if you also file a self-assessment return later. The most common failure is a landlord who sells in May, files their return the following January, and discovers the deadline passed eight months earlier.
For shares, funds, crypto and other assets, you report through self-assessment by 31 January following the end of the tax year, and pay by the same date. That is up to twenty-two months after a disposal made early in the tax year, which is a long time to keep the records — and the records are your responsibility, not your broker's.
You also need to report if your total disposal proceeds exceed a threshold set by HMRC, even where no tax is due, and if you are already registered for self-assessment. Someone selling £60,000 of shares for a £2,000 gain may owe nothing and still have a filing obligation.
Source: GOV.UK — Report and pay Capital Gains Tax on UK property
05 Same gain, four different bills
A £20,000 gain on shares, taxed four ways, holding everything constant except where and by whom it was held.
| Situation | Taxable gain | Approximate CGT |
|---|---|---|
| Held in an ISA | None | £0 — and nothing to report |
| Unwrapped, basic-rate taxpayer | £17,000 after the exemption | About £3,060 at 18% |
| Unwrapped, higher-rate taxpayer | £17,000 after the exemption | About £4,080 at 24% |
| Unwrapped, split across a couple | £14,000 after two exemptions | Lower again, and part may fall in the basic-rate band |
The gap between the first and third rows is the entire case for using the ISA allowance before it resets. The gap between the third and fourth is a form and a transfer between spouses.
Source: GOV.UK — Capital Gains Tax
Jordan's viewThe quiet story of UK CGT is the allowance, not the rate. Cutting it from £12,300 to £3,000 turned a tax most ordinary investors never met into one they hit on a single fund sale. The fix is unglamorous and entirely legal: get your investments inside ISAs and pensions, use your £3,000 and your spouse's every year, bank losses to offset gains, and split big sales across two Aprils. I treat the annual exemption like the ISA allowance — a use-it-or-lose-it that quietly compounds if you respect it. Don't sell a big gain in one lump in March when patience until April halves the bill.
— Jordan Reeves, founder, Talk Through Wealth
FAQ
What is the Capital Gains Tax allowance for 2025–26?
£3,000. You pay CGT only on total gains above £3,000 in a tax year. It was £12,300 in 2022–23, so far more people now pay CGT on modest gains.
What are the UK Capital Gains Tax rates?
Gains above the allowance are taxed at 18% within your basic-rate band and 24% above it, for both shares and residential property. Your gain stacks on top of your income to set the rate.
How do I avoid Capital Gains Tax legally?
Hold investments in an ISA or pension; use your £3,000 exemption yearly; transfer assets to a spouse; offset losses; and spread disposals across tax years. These are reliefs, not avoidance.
When do I have to report and pay CGT?
UK residential property: within 60 days of completion. Other assets: via self-assessment by the following 31 January, or HMRC's real-time service. Your main home is usually exempt.
Sources
Regulator references
- Capital Gains Tax: allowances · GOV.UK · 2024The £3,000 annual exempt amount and what counts toward it.Last verified: 2026-06-19
- Capital Gains Tax: rates · GOV.UK · 2024The 18% and 24% rates and how the gain stacks on income.Last verified: 2026-06-19
- Report and pay Capital Gains Tax on UK property · GOV.UK · 2024The 60-day property reporting deadline and the self-assessment route.Last verified: 2026-06-19
- GOV.UKGOV.UK on Capital Gains Tax: what is taxed, the annual exempt amount, and the reporting deadline.Last verified: 2026-09-07
Changelog
- 2026-06-19 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.