Capital Gains Tax (CGT) is a tax you may have to pay when you sell or dispose of an asset for more than you paid for it. It’s an important part of the UK tax system and applies to individuals as well as companies, although the rules differ slightly depending on who owns the asset.
Who Pays CGT?
A chargeable person can be either an individual or a company:
- Individuals (UK residents): Pay CGT on gains from assets anywhere in the world.
- Non-residents: Usually only pay CGT when selling UK land or property interests.
- Companies: Don’t pay CGT. Instead, any gains are taxed under corporation tax rules.
What Counts as a Disposal?
You don’t have to literally sell an item to trigger CGT. A “disposal” includes:
- Selling an asset
- Giving it away as a gift
- Losing or destroying it
If the asset is worth more than it cost you when disposed of, you may have a capital gain.
What Assets Are Chargeable?
In general, most property (except cash in sterling) is a chargeable asset. If it’s not specifically exempt, you can assume it’s chargeable.
Exempt Assets
Certain assets are always exempt from CGT, including:
- Cars designed to carry passengers (vans and lorries are not exempt)
- Wasting chattels – tangible items with a life of 50 years or less (e.g. racehorses, greyhounds)
- Low-value chattels – items sold for £6,000 or less
- Gilts and Qualifying Corporate Bonds (QCBs)
- ISA and VCT shares
- EIS/SEIS shares where income tax relief has been claimed (subject to conditions)
- Other exemptions – e.g. foreign currency for personal use, life insurance policies, medals for valour, and certain works of art
Transfers Between Spouses or Civil Partners
Assets can be transferred freely between spouses or civil partners without triggering CGT. This is called a “no gain/no loss” transfer.
The Annual Exempt Amount
For the 2025/26 tax year, everyone gets a CGT allowance of £3,000.
- Any gains up to this amount are tax-free.
- You only pay tax on the excess above £3,000.
CGT Rates (from April 2025)
- 18% on gains falling within your unused basic rate band
- 24% on gains above the basic rate band
These are the new main CGT rates from April 2025.
Example: How CGT Is Calculated (2025/26)
Let’s look at Gianluca’s situation in 2025/26:
- Income: £36,000
- Capital gains:
- Painting: £17,000
- Land: £50,000
Step 1: Work out taxable gains
- Total gains = £67,000
- Less annual exempt amount = £3,000
- Taxable gains = £64,000
Step 2: Check unused basic rate band
- Income = £36,000
- Less personal allowance = £12,570
- Taxable income = £23,430
- Basic rate band = £37,700
- Unused basic rate band = £14,270
Step 3: Apply CGT rates
- First £14,270 @ 18% = £2,568.60
- Remaining £49,730 @ 24% = £11,935.20
Total CGT payable = £14,503.80
Key Takeaways
- CGT arises when you sell or dispose of an asset for more than its cost.
- Most assets are chargeable unless specifically exempt.
- Transfers between spouses or civil partners are tax-free.
- Everyone has a £3,000 annual exemption (2025/26).
- From 2025/26, CGT is charged at 18% and 24%, depending on your income level.
