What is CGT?

CGT is a tax you pay on the profit (or “gain”) you make when you sell or dispose of an asset that’s gone up in value. It’s not the total amount you sell it for; but the difference between what you paid for it and what you sold it for. There is no adjustment to the cost to take account of inflation so inflationary gains are also taxed. 

And “disposing” of an asset doesn’t just mean selling. It could be gifting it, swapping it, or even transferring it to someone else. For example, if you give a second home to your child, that could still trigger CGT.

CGT applies when you dispose of certain types of assets, including:

• Property (but not your main home, usually)
• Shares (unless they’re held in an ISA or pension)
• Certain types of business assets
• Cryptocurrency
• Valuable personal items like jewellery, antiques, or artwork (special rules apply)

If you live in the UK and are UK tax resident (and not taxable on the remittance basis as a non-UK domiciled person), you’ll pay CGT on gains from assets anywhere in the world. If you’re not a UK resident, you’ll usually only pay CGT on UK land and property.

One helpful tip: if you’re married or in a civil partnership, you can transfer assets between each other without triggering CGT. This can be a smart way to make use of both your tax-free allowances.

Individuals get a CGT allowance called an Annual Exempt Amount (AEA). This is the amount of gains you can make before you have to pay any tax. For the 2025/26 tax year, the allowance is:

• £3,000 for individuals
• £1,500 for most trusts

This is a significant reduction from previous years, so more people are finding themselves caught by CGT. If you own something jointly with a spouse or civil partner, you can effectively shelter up to £6,000 of gains when each using the £3,000 allowance.

The rate you pay depends on the amount of your taxable income and the type of asset you’re selling.

For most assets:

• Basic rate taxpayers pay 18%
• Higher or additional rate taxpayers pay 24%

If your gain pushes you into a higher income tax band, you might end up paying the higher CGT rate on part or all of your gain.

Yes, and they can make a big difference.

• Your main home is usually exempt, thanks to something called Principal Private Residence Relief.
• If you’re selling a business, you might qualify for Business Asset Disposal Relief (BADR) on qualifying assets. This used to be called Entrepreneurs’ Relief. From April 2025, the CGT rate under BADR is 14%, and it’s set to rise to 18% in April 2026. There is currently a lifetime limit of £1m for such relief.
• Investors’ Relief is another potential exemption that can apply on the disposal of certain types of unlisted company shares. This is similar to BADR but comes with different conditions although the same rates apply and comes with a separate £1m lifetime limit.

Some assets are completely exempt from CGT and this includes:

• Most private cars
• Most personal possessions where sold for less than £6,000
• Assets held in ISAs, pensions
• Certain types of government bonds

If you sell a UK residential property, you need to report the gain and pay any CGT within 60 days of the sale completing.

For other assets, you’ll report it through your self-assessment tax return, which is due by 31 January after the end of the tax year.

Keeping good records, especially for assets like shares or cryptocurrency, is really important to make sure you properly capture the individual asset acquisition dates and costs.

Here are a few strategies to consider:

• Use your AEA amount every year if able — if possible, spread out disposals across tax years to make use of different year’s exemptions.
• Offset losses — if you’ve made a loss on another asset, you can use most such losses to reduce your gains.
• Transfer assets to your spouse or civil partner — this can help you make the most of both allowances.
• Invest through ISAs or pensions — gains inside these wrappers are CGT-free.

CGT can make a sizeable dent in your net proceeds, especially now that allowances are lower and CGT rates have been rising. Also, even if the gain in effect represents inflation it is still a taxable gain so inflationary gains are taxed too. Whether you’re selling a second home, cashing in some shares, or planning a business exit, understanding CGT can help you make smarter decisions and avoid any nasty surprises. 

This article is for information purposes only. It is not intended as investment or tax advice.

Fees and charges may apply at SPW.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Also in this article we refer to the tax rate and thresholds set for England and Northern Ireland, these may differ for the devolved nations of Scotland and Wales. 

Schroders Personal Wealth does not provide personal tax advisory and tax compliance, however we can introduce you to a relevant specialist. Schroders Personal Wealth might receive a referral fee from some of the partners we introduce to you.  

In preparing this article we have used third party sources which we believe to be true and accurate as at the date of writing but can give no assurances or warranty regarding the accuracy, currency or applicability of any of the contents in relation to specific situations and particular circumstances.

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