What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax you may have to pay when you sell or give away an asset (something that holds value like shares, funds, or a second property) for more than you paid for it.
The “gain” is the profit — and CGT is the tax charged on that profit (above your annual allowance).
What kind of assets does CGT apply to?
Capital Gains Tax can apply when you make a profit selling or disposing of assets like:
- Shares (including individual company shares)
- Investment funds (unit trusts, OEICs, ETFs)
- Second homes / buy-to-let property (not usually your main home)
- Land
- Business assets (including shares in a private business)
- Cryptocurrency (like Bitcoin)
- Valuable personal possessions (“chattels”) worth over £6,000, such as art, jewellery, antiques
- Certain collectables (e.g. classic cars, depending on value and circumstances)
CGT doesn’t usually apply to things like cash savings, your car (in most cases), or assets held inside an ISA or pension.
How is CGT worked out?
CGT only applies to the gain you’ve made – not the amount of money you receive for the sale.
For example, if you invested £5,000 in company shares and sold your later for shares for £25,000, you’ve made a gain of £20,000. It’s the £20,000 that will be taxed.
However, you will only need to pay Capital Gains Tax on the overall gains you make above your tax-free allowance (called the Annual Exempt Amount).
The Capital Gains tax-free allowance for 2025-26 is:
£3,000 (or £1,500 for trusts)
When do you not need to pay CGT?
- You will not need to pay Capital Gains Tax at all if your gains fall within the tax-free allowance amount (£3,000, or £1,500 for trusts).
- You do not pay Capital Gains Tax on the sale of certain assets including cash savings, your car and, in most cases, the sale of your main home (see below for more details on this).
- And you will not need to pay CGT on any gains you make within: ISAs or PEPs, or from UK government gilts and Premium Bonds, betting, lottery or pools winnings.
Is CGT applied when you sell your main home?
No, Capital Gains Tax isn’t normally paid when you sell your main home, because it’s covered by Private Residence Relief.
However, CGT can apply if:
- you’ve rented it out (beyond certain allowances)
- you’ve used part of it exclusively for business
- the property is over a certain size
- it hasn’t been your main residence for the whole time you owned it
