How Capital Gains Tax is worked out
Capital Gains Tax (CGT) is charged on the gain you make when you sell or give away an asset, not on the amount you receive. For most disposals the calculation has four steps:
- Work out the gain. Sale price (or market value for a gift) less what you paid and allowable costs, such as legal and agent fees, stamp duty on the purchase and capital improvements;
- Deduct losses. Losses from the same tax year are set off in full; losses brought forward only reduce gains down to the annual exempt amount;
- Deduct the annual exempt amount. £3,000 for individuals in 2026/27;
- Apply the rate. The rate depends on how much of your basic rate band your taxable income has left.
Rates for 2026/27
| Gain | 2026/27 rate |
|---|---|
| Within your unused basic rate band | 18% |
| Above the basic rate band, or any gain for higher and additional rate taxpayers | 24% |
| Gains qualifying for Business Asset Disposal Relief | 18% |
| Gains qualifying for Investors' Relief | 18% |
| Trustees and personal representatives | 24% |
Since 30 October 2024, residential property and other assets have been taxed at the same 18% and 24% rates. The rate for Business Asset Disposal Relief (BADR) and Investors' Relief rose to 18% on 6 April 2026, from 14% in 2025/26, so in 2026/27 the reliefs only save tax for gains that would otherwise fall into the 24% rate.
Using your basic rate band
To find the rate, take your taxable income (income less the personal allowance) and see how much of the £37,700 basic rate band is left. Gains that fit into the remaining band are taxed at 18%, and the rest at 24%. Personal pension contributions and Gift Aid extend the band, so they can lower your CGT bill as well as your income tax.
Gains qualifying for BADR or Investors' Relief use the remaining band first. You can then set the annual exempt amount and any losses against the gains that would be taxed at 24%, which the calculator does automatically.
Business Asset Disposal Relief and Investors' Relief
BADR applies when you sell all or part of a business you have run as a sole trader or partner for at least two years, or shares in a trading company where you have been an employee or officer and for two years held at least 5% of the shares and voting rights, plus a 5% economic interest (profits and assets, or sale proceeds). Different conditions apply to EMI shares. It is capped at £1 million of lifetime gains; anything above that is taxed at the normal rates. Budget 2026 announced the limit will fall to £500,000 from 6 April 2027.
Investors' Relief applies to disposals of qualifying shares that meet HMRC's conditions, and has its own £1 million lifetime limit for disposals since 30 October 2024. Budget 2026 also announced a new Founders' Relief from 6 April 2027: a 10% rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies. Its design is still being consulted on, it is due to be legislated in Finance Bill 2026-27, and it does not apply to 2026/27 disposals.
Worked example
A landlord sells a buy-to-let flat in England for £320,000 in 2026/27. They bought it for £210,000 and paid £8,000 in stamp duty, legal and estate agent fees. Their other taxable income is £40,000 and they have no losses.
| Step | Amount |
|---|---|
| Gain: £320,000 − £210,000 − £8,000 | £102,000 |
| Less annual exempt amount | −£3,000 |
| Taxable gain | £99,000 |
| Unused basic rate band: £37,700 − £27,430 | £10,270 |
| £10,270 at 18% | £1,848.60 |
| £88,730 at 24% | £21,295.20 |
| Capital Gains Tax | £23,143.80 |
Because this is UK residential property, the landlord must report the sale and pay the £23,143.80 within 60 days of completion through a Capital Gains Tax on UK property account, then include it on their Self Assessment return.
Reporting and paying
For UK residential property with tax to pay, the 60-day deadline applies to completions since 27 October 2021. Non-residents must report every sale of UK property or land, even when there is no tax to pay. Other gains go on your Self Assessment return for the year, with the tax due by 31 January after the tax year ends. If you are in Self Assessment, you must also report gains when your total disposal proceeds were more than £50,000, even if the gains are within the allowance.
What this calculator does not cover
- Your main home. Private Residence Relief can remove or reduce the gain on a home you have lived in;
- Share pooling. Shares of the same class bought at different times follow special matching and pooling rules;
- Gift hold-over, rollover and incorporation relief. These defer gains rather than reduce the rate;
- EIS and SEIS. Deferral and exemptions are not modelled;
- Trustees, estates, companies and non-residents. Each has its own rules or rates;
- Several disposals in a year. Work out the main gain here and tick the box if your allowance is already used.
Getting advice before you sell
The timing of a sale, who owns the asset and which reliefs you claim can change the tax by thousands of pounds. Our Capital Gains Tax advisers review disposals before they happen and file the 60-day property returns. Landlords can also see our property tax advice or check the tax on their rent with the landlord tax calculator.