Understanding Capital Gains Tax is something many business owners and property investors put off — until they suddenly find themselves with a disposal to report and a tax bill they weren’t expecting. We see it regularly, and it’s almost always avoidable with a bit of forward planning.

CGT is the tax you pay on the profit — the gain — when you sell or dispose of an asset that has increased in value. That might be a second property, shares, a business, or even certain personal assets. It’s not the sale price that gets taxed; it’s the difference between what you paid and what you received.

The rules around CGT have shifted significantly over the past couple of years, with rate increases taking effect in April 2026. So whether you’re a landlord, a business owner planning an exit, or simply trying to understand your tax position, this is a good moment to get up to speed.

CGT applies when you dispose of a chargeable asset — and disposal is a broader term than most people realise. It includes selling an asset, gifting it, transferring it to a spouse or business partner (in some circumstances), and receiving insurance proceeds after an asset is lost or destroyed.

The most common assets that trigger CGT for our clients are:

• Residential property that isn’t your main home (buy-to-let, HMOs, second properties)
• Shares and investment funds held outside an ISA
• Business assets — equipment, goodwill, property used in a trade
• The sale of a business or a stake in one

Your main home is usually exempt under Private Residence Relief, though there are conditions — particularly if you’ve rented the property out at any point or have more than one home.

One thing worth being clear on: CGT is separate from Income Tax. You report it on your Self Assessment return, but it’s calculated differently, with its own rates and its own annual allowance. Conflating the two is one of the most common sources of confusion we come across.

The rates that apply to your gain depend on two things: the type of asset, and whether you’re a basic or higher rate taxpayer once the gain is added to your income for the year.

For the 2025/26 tax year, the rates are:

• Residential property: 18% for gains within the basic rate band, 24% for gains that fall into the higher rate band
• Other assets (shares, business assets, etc.): 18% within the basic rate band, 24% above it

One point worth noting: non-residential CGT rates were equalised with residential property rates in the October 2024 Budget, which was a significant shift from the previous landscape where shares and business assets attracted lower rates.

The annual exempt amount — the slice of gains you can make each year before any CGT is due — is £3,000 for individuals in 2025/26, and £1,500 for trustees. That’s a substantial reduction from the £12,300 exemption that existed just a few years ago, which means far more people are now caught by CGT on disposals that would previously have been entirely tax-free.

The practical implication: gains that felt comfortably under the old threshold no longer are. Timing disposals across tax years, or using a spouse’s allowance, has become meaningfully more valuable as a planning tool.

If you’re selling a qualifying business or shares in your own company, Business Asset Disposal Relief (BADR) — formerly Entrepreneurs’ Relief — may apply. It gives you a reduced CGT rate on the first £1 million of qualifying lifetime gains.

For the 2025/26 tax year, that reduced rate was 14%. As of April 2026, it has increased to 18% — the same rate as the standard CGT basic rate for other assets.

The lifetime limit of £1 million remains unchanged. But the gap between the BADR rate and standard CGT has narrowed considerably. A few years ago, BADR delivered a 10% rate against a 20% headline rate — a 10 percentage point saving. Today the headline rate for most assets is 24% at the higher end, so there is still a benefit, but the planning calculus has shifted.

For business owners approaching a sale, this makes timing and structuring decisions more important than ever. If you claimed BADR at 10% in previous years, that’s already used some of your lifetime limit. If you’re planning a disposal now, the first question is always: does this qualify, and have you structured things correctly in advance?

Qualifying conditions for BADR are specific — you generally need to have owned the business or shares for at least two years, held at least 5% of the ordinary share capital, and been an employee or officer of the company. Getting this wrong is costly and, by the time you’ve sold, largely irreversible.

This is the one that catches the most people off-guard. When you sell a residential property in the UK that gives rise to a Capital Gains Tax liability, you are required to report the disposal and pay any CGT owed within 60 days of completion.

This isn’t part of your annual Self Assessment return — it’s a separate report made through HMRC’s online service. And the clock starts from the date of completion, not the date contracts are exchanged.

Miss the 60-day window and HMRC will issue automatic late-filing penalties, along with interest on the unpaid tax. In our experience, many landlords and property investors still don’t know this rule exists — particularly those who haven’t sold a property since it came into force.

The reason it matters so much is practical: completing a property disposal is a busy, stressful time. The last thing most people are thinking about is logging into an HMRC portal and filing a tax report. But it needs to happen, and it needs to happen quickly.

If you’re selling a rental property or second home, get your accountant involved before completion, not after. Working out the gain, identifying any allowable costs, and checking whether any reliefs apply takes time — and doing it in a rush under a 60-day deadline is not a situation anyone wants to be in.