Capital gains tax in the UK isn’t always front of mind — until you’re about to sell something significant. A business, a rental property, shares, or another asset that’s grown in value. At that point, the tax treatment suddenly matters a great deal, and getting it wrong can be costly.

The 2024 Autumn Budget introduced several changes that have now taken effect, and the 2026/27 tax year brings further movement — most notably for business owners relying on Business Asset Disposal Relief. The annual tax-free allowance has also been reduced substantially from where it was just a few years ago, meaning more gains are now taxable for more people.

We work with a lot of owner-managed businesses and property investors, so we see these questions come up regularly. This is our plain-English take on where the rules stand right now, and what you should be thinking about before you make any disposal.

Capital gains tax (CGT) is charged on the profit you make when you dispose of an asset that has increased in value. ‘Dispose of’ covers selling, gifting, transferring, or otherwise parting with the asset — not just a straight sale.

The tax is charged on the gain, not the sale price. So if you bought a property for £200,000 and sell it for £320,000, the gain is £120,000. You’d then deduct your annual exempt amount (more on that below), and pay CGT on whatever remains.

The assets most commonly caught by CGT include:

• Residential and commercial property (other than your main home, where private residence relief usually applies)
• Shares and investment funds held outside an ISA
• Business assets — including shares in a trading company when you sell or exit the business
• High-value personal possessions worth over £6,000

CGT is reported and paid through your Self Assessment tax return in most cases — though residential property disposals have their own separate reporting timeline, which we cover below. It’s also worth noting that CGT is separate from Income Tax, though your income tax band does affect which CGT rate applies to you.

For the 2026/27 tax year, the main CGT rates for individuals remain at 18% (basic rate taxpayer) and 24% (higher or additional rate taxpayer). These rates apply to most assets, including residential property.

The annual exempt amount — the amount of gain you can make each tax year before CGT applies — is £3,000. That’s a significant reduction from the £12,300 allowance that existed just a few years ago, and it catches out a lot of people who made plans based on the old figures. If you haven’t revisited any disposal plans with that in mind, it’s worth doing so.

Here’s a quick summary of the key rates:

One thing worth remembering: CGT is assessed on top of your income for the year. So if your income already uses up your basic rate band, the entire gain will be taxed at the higher rate. Timing a disposal to a lower-income year — or across two tax years — can make a real difference.

Business Asset Disposal Relief (BADR) — formerly Entrepreneurs’ Relief — allows qualifying business owners to pay a reduced rate of CGT when they sell or exit a business. For many of the owner-managed businesses we work with, this is the most important CGT relief on the table.

The rate has been climbing. In 2025/26, BADR was charged at 14% on qualifying disposals made on or after 6 April 2025. From 6 April 2026, that rate has increased to 18% — bringing it in line with the standard basic rate for most assets.

The lifetime limit remains at £1 million of qualifying gains, meaning the maximum tax saving from BADR is now £60,000 (compared to £100,000 when the rate was 10%, as recently as 2024). That’s still significant, but the relief has become meaningfully less generous over a relatively short period.

To qualify for BADR, you generally need to have been a director or employee of the company, own at least 5% of the ordinary shares and voting rights, and have met those conditions for at least two years. The rules have some nuance, and we’d always recommend getting proper advice before assuming a disposal qualifies — particularly if your shareholding has changed or if you’ve recently diluted through new investment rounds.

If you’re planning an exit in the next year or two, the timing of your disposal date matters more than ever.

If you sell a UK residential property and CGT is due, you don’t wait until your next Self Assessment return to report and pay it. HMRC requires you to report the gain and make payment within 60 days of completion.

This catches a lot of landlords and property investors off guard, particularly if they’re used to dealing with everything through their annual tax return. The 60-day clock starts from the date of legal completion — not exchange, not the date you receive the money.

Missing the deadline triggers automatic penalties and interest, which is entirely avoidable with a bit of planning. If you know a sale is coming, it’s worth speaking to your accountant before you complete so the figures are ready to go promptly.

It’s also worth noting that the 60-day reporting obligation applies even if the gain is fully covered by your annual exempt amount or other reliefs and no tax is actually due — though HMRC has at times relaxed enforcement in those specific cases. Our advice is to report regardless and avoid the ambiguity.

For commercial property, the normal Self Assessment timeline applies, so you’d report through your tax return for the year the disposal falls in. If you’re unsure which category your property falls into, particularly with mixed-use properties, it’s worth getting clarity before you complete.

CGT planning doesn’t have to be complicated, but it does benefit from being done ahead of time rather than after the fact. A few areas we regularly help clients think through:

Using your annual exemption

With the annual exempt amount now at just £3,000, it’s more limited than it used to be — but it’s still worth using. If you have multiple assets to dispose of, sequencing them across tax years can allow you to shelter more of the gain.

Transfers between spouses and civil partners

Disposals between spouses are tax-free, and each person has their own annual exemption and their own rate bands. Transferring an asset to a spouse before sale — where that reflects genuine ownership — can reduce the overall CGT bill. This requires proper planning and the transfer must be genuine, not purely cosmetic.

Employee Ownership Trusts

One relief that has become less attractive is the CGT exemption for sales into Employee Ownership Trusts (EOTs). From 26 November 2025, the relief is reduced from a full 100% exemption to 50%, which changes the economics of EOT exits considerably. If this was part of your succession thinking, it’s worth revisiting those projections.

Timing and income levels

Because CGT sits on top of your income, the tax year in which you make a disposal — and how much other income you have that year — can shift the effective rate you pay. A planned disposal in a lower-income year can make a meaningful difference.