Capital Gains Tax allowance and rates explained
What counts as a chargeable gain, how much you can make tax-free, and how the basic and higher rates are actually applied.
Written by Jack Dev · Last updated 2 October 2026
What Capital Gains Tax applies to
Sell something that's gone up in value — shares, a fund, a second property — and Capital Gains Tax (CGT) might apply to the profit. Just the profit, mind, not the sale price, and only once it clears your annual tax-free allowance.
Your own home is usually safe under Private Residence Relief, and personal items worth under £6,000 each — most cars, most everyday belongings — sit outside CGT entirely.
The tax-free allowance
The allowance itself is modest these days: £3,000 of gains a year, tax-free, for 2026/27. Anything above that gets taxed at a rate that depends on your income for the year — there's no single flat CGT rate to quote.
How the rate is actually worked out
Think of your taxable gain (after the £3,000 allowance) as sitting on top of your other income. Whatever fits inside your remaining basic-rate band gets taxed at 18%; the rest, pushed into higher or additional-rate territory, gets taxed at 24%.
Worked example: £40,000 of other income, plus a £20,000 gain after the allowance. That leaves £10,270 of basic-rate band before hitting the £50,270 higher-rate line, so that slice is taxed at 18% (£1,848.60), and the remaining £9,730 at 24% (£2,335.20). Total bill: £4,183.80.
What reduces a taxable gain
Your actual gain is the sale price minus what you paid, minus costs like the original Stamp Duty, legal and agent fees, and genuine improvements (not routine upkeep — a new kitchen counts, a repainted wall doesn't). Losses from other sales in the same tax year, or carried forward from previous ones, come off before the allowance and rates are applied.
Enter your gain and other income into our Capital Gains Tax Calculator and it handles the £3,000 allowance and the 18%/24% split for you.
Frequently asked questions
£3,000 per individual for 2026/27 — anything above that is taxed at 18% or 24% depending on your income.
Usually not. Private Residence Relief covers most people when selling the home they actually live in.
Because it depends on how much of your taxable gain falls within your remaining basic-rate band (18%) versus higher or additional-rate territory (24%) — it's based on your total income for the year, not the gain in isolation.
This guide is general information, not financial or tax advice — check GOV.UK or a qualified adviser for anything that affects a real financial decision.