Capital gains tax — CGT — is a tax on the profit you make when you sell or dispose of an asset that has gone up in value. It is not a tax on the full sale price; it is a tax on the gain. So if you bought something for £40,000 and sold it for £70,000, it is the £30,000 difference that HMRC is interested in, not the £70,000 you received.

That sounds straightforward enough, but in practice CGT is one of the more misunderstood taxes we deal with at Edward Harris. The rates are higher than many people expect, the annual allowance has fallen sharply in recent years, and the rules around business sales have changed materially. If you have a disposal coming up — or you are simply trying to understand your position — this is where to start.

CGT applies when you dispose of a chargeable asset and make a gain above your annual exempt amount. Disposal does not just mean selling — it also includes giving an asset away, transferring it to someone else, swapping it, or receiving compensation for its loss or destruction.

Common assets that trigger CGT include:

• Residential property that is not your main home (including buy-to-let and second homes)
• Shares, funds, and investment bonds held outside of an ISA or pension
• Business assets — plant, equipment, goodwill, or the business itself when you sell
• Cryptocurrency holdings
• Valuable personal items (known as chattels) worth more than £6,000

Some disposals are exempt. Your main home usually qualifies for Private Residence Relief, meaning no CGT is due on the gain when you sell the house you live in. ISA holdings are fully sheltered. Gifts between spouses or civil partners are treated as a no-gain, no-loss disposal, which defers rather than eliminates the tax.

If an asset is held inside a limited company, the company pays corporation tax on any gains rather than CGT — which is an important distinction for business owners who hold investment property or other assets through a company structure.

The rates that apply depend on the type of asset and where the gain falls in relation to your income tax bands. As of 6 April 2026, the rates are as follows:

• Basic rate taxpayers — 18% on gains that fall within the basic rate band, and 24% on any excess above it
• Higher and additional rate taxpayers — 24% on gains
• Trustees and personal representatives — 24%

These rates apply to most assets. Residential property gains were already taxed at these rates following earlier changes, so for landlords and second-home owners nothing shifts at the headline level from 2026-27 onwards.

It is worth noting that your taxable income and your capital gains are added together to determine which band applies. So a basic rate taxpayer with a large gain can find that part of the gain is taxed at 18% and the rest at 24%, depending on how much headroom they have in their basic rate band.

If you are planning a disposal and the timing is at all flexible, understanding exactly where your gain lands in relation to your income is one of the more straightforward ways to reduce the bill — and it is the sort of calculation we run routinely with clients before they commit to a sale.

Every individual gets an annual CGT exempt amount — a slice of gains each year on which no CGT is due. For 2026-27, that allowance is £3,000.

To put that in context: as recently as 2022-23 the allowance was £12,300. It was halved to £6,000 in 2023-24, halved again to £3,000 in 2024-25, and has remained at £3,000 since. The practical effect is that gains which would once have been fully sheltered are now largely taxable.

For investors who rebalance portfolios annually or sell shares in tranches, this is a significant change. Strategies built around crystallising gains within the old allowance year by year need revisiting. The allowance does not carry forward — unused portions are simply lost.

Married couples and civil partners each have their own £3,000 allowance, which means a couple disposing of jointly held assets can shelter up to £6,000 in total. Timing disposals across tax years, or structuring joint ownership, can still make a meaningful difference — but the sums are smaller than they were.

If you are a landlord or property investor, we cover the interaction of the annual allowance with property-specific rules in our guide to capital gains tax on property.

Business Asset Disposal Relief (BADR) — formerly known as Entrepreneurs’ Relief — provides a reduced CGT rate when you sell a qualifying business or business assets. It is designed to reward business owners for the risk they take in building a company.

The headline BADR rate has changed significantly over the past two years. It was 10% before October 2024, rose to 14% from April 2025, and from 6 April 2026 it stands at 18%. The lifetime limit on qualifying gains remains at £1 million — gains above that threshold are taxed at the standard 24% rate.

That lifetime limit means that if you sell a business worth £1.5 million with a £1.2 million gain, the first £1 million is taxed at 18% and the remaining £200,000 at 24%. The relief still represents a meaningful saving compared to the full rate, but the gap has narrowed considerably.

Investors’ Relief — which applies to external investors in unlisted trading companies rather than working owners — has followed the same trajectory, also rising to 18% from April 2026.

If you are thinking about selling your business and want to understand how BADR interacts with your personal tax position, our resource on Entrepreneurs’ Relief is a good place to start before we talk through the specifics together.

How you report a gain — and how quickly you have to pay — depends on the type of asset involved.

For UK residential property, HMRC requires you to report the gain and pay any CGT due within 60 days of completion. This catches a lot of landlords and second-home sellers off guard. The 60-day window applies even if you are filing a Self Assessment return, and missing it results in automatic penalties and interest.

For other assets — shares, business assets, and most other chargeable gains — the gain is reported through your Self Assessment tax return for the relevant tax year, with payment due by 31 January following the end of that year.

If you do not normally file a Self Assessment return, you may need to register in order to report a gain. HMRC also operates a real-time CGT reporting service for some asset types, which can be useful if you want to deal with the liability promptly rather than wait until January.

Good record-keeping makes all of this significantly easier. You need to know the acquisition cost, any costs of improvement or disposal, the date of purchase, and the date of sale. For assets held for many years — or inherited assets — establishing the correct base cost is often the trickiest part of the calculation, and getting it wrong in either direction creates problems.