Beyond the numbers

What is Capital Gains Tax in the UK?

Stuart Crook 08/11/2023 16 minute read

Stuart Crook FCA, explains the concept of Capital Gains Tax and how it's applied to the gains made on the sales of assets.

Do you own second homes, antiques, shares, or other assets that you're looking to sell?

Are you aware of the tax liability you could generate through the disposal of these assets?

Any money you generate from a transaction could be referred to as a potential gain, or profit, and this may then make you liable for Capital Gains Tax (CGT). As with so many UK taxes, there are a plethora of different rules and reliefs around CGT, meaning calculating the tax you owe can be a potentially very complicated process. 

That's why we've written this blog post, to provide you with an understanding of the concepts of CGT and how it works. This will equip you with the knowledge you need to have an idea of whether CGT applies, the allowances you may be able to claim, and which reliefs you can potentially make use of. Just remember, CGT is very specific to your personal circumstances, so whilst this blog is a useful guide, it can't substitute for taking professional advice!

Advice to help reduce your Capital Gains Tax bill


Read on to find out more about:

Typically it's applicable to:

  • Shares
  • Investment funds
  • Second properties
  • Inherited properties
  • The sale of a business
  • Valuables including art, jewellery, and antiques
  • Assets transferred at below their market value

Capital gains on these assets are currently taxed at different rates than those of income tax. This is because purchasing such assets is seen as taking a risk, either entrepreneurial or investment, so the additional burden of risk carries greater potential reward.

2. How much is Capital Gains Tax in the UK?

If you've sold assets for a profit, then you benefit from the CGT annual allowance of £6,000 for the 2023/24 tax year. Above this, the CGT you're charged depends on:

1. Whether you're a basic-rate, higher-rate, or additional-rate tax payer

2. The type of asset you've sold

You can't carry the allowance forward into the next tax year so it's generally sensible, where relevant, to make use of it for your gains each year. It's usually wise to also consider carefully how disposals of assets might work best for you now, from a tax perspective, versus in the future. 

The last point is very relevant given the CGT allowance is set to reduce again to £3,000 on 6 April 2024. Careful planning is therefore pertinent in order to make use of the exemption. The annual allowances and tax band rates for the current, and next tax year are detailed in the tables below.

Tax band

CGT on residential property
CGT on other assets

Annual allowance

Gains up to £6,000





Basic-rate tax payer

£12,571 - £50,270

18% 10%

Higher/additional rate tax payer

£50,271 +

28% 20%


Tax band

CGT on residential property
CGT on other assets

Annual allowance

Gains up to £3,000





Basic-rate tax payer

£12,571 - £50,270

18% 10%

Higher/additional rate tax payer

£50,271 +

28% 20%

3. How does Capital Gains Tax work?

Where your gains are above the annual allowance, you have to apply the appropriate rate to the gain you have made on the asset(s) in question. Where you own an asset with another person, such as in a marriage, you can both apply your allowances. This means where a gain is made on the sale of a second home for example, you can double the amount you make to £12,000 in the 2023/24 tax year before CGT becomes applicable.

You are also allowed to transfer assets between partners in a marriage or civil relationship to help reduce your CGT liability. If you do transfer an asset to a partner and later make a gain on selling it, the amount of CGT due will be based on the total time you owned the asset as a couple, not from the date when it was transferred to your partner.

Of note, this should always be done after taking specific advice because other reliefs may also apply. 

4. When do you have to pay Capital Gains Tax?

You have to declare your profit, and apply the relevant tax band rate in your annual self assessment tax return. You then settle the bill through payment on account.

However, if you have a second property that you're disposing of, you only have 60 days after completion to declare the capital gain and make any potential payment to HMRC.

5. Inheritance

In instances where you inherit an asset there is no CGT liability until you decide to sell it. It's very important that you know and record what the value of the asset was when it was passed down to you! This then acts as the effective purchase price, usually the probate value on the date of death.

Don't lose your notes on the value of assets where you're the beneficiary in a will. This is because the amount of CGT you will then owe, if you sell them, will be based on the gain from the sale price, compared to the price at the time you inherited them. 

If you sell the asset during the period of estate, that is from the date of death to the completion of the administration of the estate, even then there could be a gain and therefore CGT due.

6. Capital Gains Tax Reliefs explored

Over the years various government's have created a vast number of reliefs around CGT which  you can potentially make use of. Some of these include:

Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs' relief

BADR is designed to incentivise people to grow a business by reducing CGT to a flat rate of 10%, rather than the higher rate of 20%. This applies to the first £1m of gains from selling a business.

The 10% rate applies no matter what your level of income. Also, there is no limit to how many times you can claim within the £1m lifetime allowance.

BADR is subject to the following criteria when selling shares:

  • The person selling the shares has to be an officer or employee of the organisation
  • The person making the gain has to own at least 5% of the ordinary share capital of the business
  • The business has to have been trading in the 24 months leading up to the date when the shares are sold

These are subject to a number of anti-avoidance restrictions that must be considered carefully when reviewing your tax position.

BADR is also available on the disposal of partnership assets and gains subject to additional conditions.

Principal Private Residence

Principal Private Residence is a tax relief that permits taxpayers to sell their main homes without having to pay CGT. The key to qualifying for this relief is that the property needs to be, or have been, your main residence.

Specifically, this means if the property was your main residence for the full duration of ownership, then there is no CGT liability. If you sell a property that wasn't your main residence during the period of ownership, then CGT may apply. However, PPR can provide you with a 9 month period of exemption, referred to as the final period exemption.

This means in the last 9 months of ownership, even if the property was rented out you get PPR relief, if at some point you have lived in the property. Consequently you don't have to pay CGT on the gains made during that final 9 month time frame.

Historically this has been useful for couples engaging in the divorce process where a property needs to be sold and assets divided. The date of separation is key for this one and could lead to a CGT bill if not planned properly.

Investor relief

This provides CGT relief to individual investors on the disposal of investments in ordinary shares. The relief reduces the tax rate on gains to 10% for higher rate taxpayers. Disposals have to have been made after 6 April 2019 and the investments have to have been held for 3 years and made on, or after, 17 March 2016. The relief is also subject to a lifetime cap of £10m.

Shares have to be subscribed for in cash, and the business being invested in must be the trading company, or holding company of a trading group.

Roll over relief

Roll over relief is applied where trading assets are sold and replaced with new assets using the proceeds from the sale. The capital gain from selling a trading asset can be deferred against the cost of purchasing another business asset.

This works in terms of the CGT liability whereby the chargeable gain is deducted from the cost of the new asset. To qualify the assets must be used for the purposes of trading. Also the new assets must be purchased from 12 months before the disposal and no more than 3 years after.

The relief is restricted in instances where you only use part of the sale proceeds to purchase the new asset. Finally, the new asset must be used for trading purposes as soon as it's purchased.

Hold over relief for gifts

CGT also applies to gifts you may receive from people other than your spouse or civil partner. Hold over relief means when someone gifts you an asset, they don't pay any tax on the effective sale of that asset. As with CGT and inheritance, you need to conduct a valuation when you're gifted the asset. Then when you come to sell the asset any gain will be calculated from the price on the date it was gifted to you. 

7. Deducting losses from your CGT bill

You may make a profit from the sale of one asset but lose money on the sale of another in a tax year. The good news is your CGT bill can take account of both profit and loss. This means in certain circumstances you can subtract the loss from the profit to calculate your total CGT liability.

Further good news is that you can potentially carry forward any losses that you haven't used, to offset your gains. This means you should state specific losses on your tax return, even if you haven't made any gains and CGT isn't due. It will then be easier to offset the loss against any potential future gains. 

8. Circumstances where CGT doesn't apply

In general, the list below highlights the assets and conditions where you don't have to pay CGT:

  • The sale of your main home
  • Gifts between married and civil partners
  • The sale or gifting of cars that aren't used for business purposes
  • The gifting of personal possessions to a limit of £6,000 per year
  • Wasting assets, namely those with a useful lifespan of 50 years or less
  • ISAs and Peps
  • Gold, silver, and platinum coins
  • Gifts to charities
  • Betting and lottery winnings
  • UK government gilts
  • The proceeds of life insurance policies
  • National Savings & Investments products, child trust funds, and pensions
  • Employee shares held in approved share incentive schemes 
  • Gains on some tax efficient investments
Of note, all the above should be checked carefully with an advisor to ensure that your individual, specific circumstances don't result in you incurring an unexpected CGT charge.   

9. How cryptocurrency gains are taxed

If you have invested in cryptocurrencies and this has resulted in gains, you need to understand that the government don't treat crypto as money. If you are UK based and hold crypto assets then you will be taxed on the related profits.

This means you're taxed on the gains from crypto assets, in the same way as CGT is applied to the profits generated from selling shares. CGT doesn't apply to the paper (unrealised) gains of crypto, rather when you trade it for other cryptocurrency, or convert it into pounds sterling at which point your gains are realised.

As with other assets, the annual CGT allowance is applied and your profits are calculated based on the difference between how much your cryptocurrency cost you versus how much you sold it for. You also need to take account of the 30 day rule. This prevents people from using their CGT allowance each year by selling shares and then buying them back the next day. Doing this can increase the purchase price and therefore potentially help minimise CGT exposure.

Instead, if you sell shares then have to wait 30 days before re-investing in those very shares. If you don't wait 30 days then  “matching” rules apply which in effect stop the cost base from being reset. Cryptocurrencies can be traded often which then makes it difficult to work out the CGT liability.

Whilst you can purchase assets using cryptocurrency, this in itself can trigger a CGT liability. For example, if you purchase an asset for £100,000 using Bitcoin, and your Bitcoin cost you £90,000 then there is a CGT charge on the £10,000.

Of note, cryptocurrency also forms part of your estate as an asset. This means it's also potentially subject to inheritance tax should you pass it down to beneficiaries in the event of your death.

A word of warning!

As with a number of taxes, it is important to consider how they overlap with other taxes. It is common for Stamp Duty, VAT, Income tax and Inheritance Tax to be included in CGT tax planning so please be careful not to deal with this in isolation. For peace of mind, and to optimise your tax profile, be sure to obtain professional advice.

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The content of this post was created on 14/12/2020 and updated on 08/11/2023.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.



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