Capital Gains Tax Explained: What You Need to Know

Capital Gains Tax (CGT) is one of those areas of tax that often catches people by surprise. Whether you’re selling property, shares, or other valuable assets, it’s important to understand how CGT works, when it applies, and what you need to do to stay compliant with HMRC.

This guide follows on from our recent posts on Making Tax Digital for ITSA and Payments on Account, continuing our series of simple explainers designed to help you navigate the UK tax system with confidence and how ASBA can support you.

In this article, we’ll break down the essentials of Capital Gains Tax, who it affects, the rates you’ll pay, and how to report and pay it.

💡 What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit you make when you sell (or ‘dispose of’) an asset that’s increased in value. It’s the gain that’s taxed, not the amount of money you receive.

For example:

• You buy shares for £5,000 and later sell them for £15,000.

• Your gain is £10,000.

• You may need to pay CGT on that £10,000, depending on your allowance and tax band.

🏡 Which Assets are Liable?

You may need to pay CGT when you dispose of:

• Property (that isn’t your main home)

• Shares (excluding those held in ISAs or pensions)

• Business assets

• Personal possessions worth more than £6,000 (excluding cars)

Some assets are exempt, but it’s always worth checking. The team here at ASBA Accounting can help you with identifying whether your assets are liable or not.

📊 Current Rates & Allowances (2025/26 Tax Year)

• Annual Exempt Amount:

  • £3,000 per individual

• Rates:

  • 18% for basic rate taxpayers

  • 24% for higher/additional rate taxpayers

  • Previously, the rates were different depending on the asset sold; however, all CGT rates have now been made the same, regardless of the asset. 

  • There are slightly different rates and procedures for interest gain rates. Please get in contact if you feel your gain may fall into this category, and we can help ascertain this for you

📝 How to Report and Pay

• Property: You must report and pay CGT within 60 days of completion of the sale.

• Other assets: Usually reported via your Self Assessment tax return.

• Records: Keep detailed records of purchase and sale prices, fees, and improvement costs for property disposals. Or records of interest, fees and statements for any share sales.

🧮 How Does CGT Work in Practice?

Understanding the rules and rates is one thing, but seeing how Capital Gains Tax is actually calculated makes it much easier to grasp. Below are a few simple worked examples that show how CGT applies in different scenarios - depending on whether the asset is property or shares, whether the taxpayer is basic or higher rate, and whether the annual allowance has been used or not.

📌 Example 1: Selling a Second Home as a Higher-Rate Taxpayer (Allowance Already Used):

Sarah is a higher-rate taxpayer. She sells a second home with a £50,000 gain after deducting costs. She has already used her £3,000 annual allowance on a share sale.

• Chargeable gain: £50,000

• CGT rate for residential property: 24% (higher/additional rate)

• Tax due: £12,000

• Tax payment deadline: 60 days after completion

📌 Example 2: Selling Shares as a Basic-Rate Taxpayer (Allowance Available):

John is a basic-rate taxpayer. He sells some shares with a £50,000 gain after deducting costs. He has NOT used his £3,000 annual allowance.

• Total gain: £50,000

• Annual exempt amount: £3,000

• Chargeable gain: £47,000

• CGT rate for share sale: 18% (basic rate)

• Tax due: £8,460

• Tax payment deadline: declared and paid on a Self-Assessment Tax Return

📌 Example 3: Selling a Second Home as a Higher-Rate Taxpayer (Allowance Available):

Emma is a higher-rate taxpayer. She sells a second property with a £20,000 gain after deducting costs. She has not used her £3,000 annual allowance this year.

• Total gain: £20,000

• Annual exempt amount: £3,000

• Chargeable gain: £17,000

• CGT rate for residential property: 24% (higher/additional rate)

• Tax due: £4,080

• Tax payment deadline: 60 days after completion

  
  

📌 Example 4: Selling a Second Home as a Basic-Rate Taxpayer (Allowance Available):

James is a basic-rate taxpayer. He sells a second home with a £20,000 gain after deducting costs. He has not used his £3,000 annual allowance this year.

• Total gain: £20,000

• Annual exempt amount: £3,000

• Chargeable gain: £17,000

• CGT rate for property (basic rate): 18%

• Tax due: £3,060

• Tax payment deadline: 60 days after completion

As these examples show, the amount of Capital Gains Tax you’ll pay depends on three key factors: the type of asset you’re selling, your income tax band, and whether you’ve already used your annual allowance.

✅ Key Takeaways:

• Capital Gains Tax is charged on the profit from selling certain assets.

• Annual exempt allowance is £3,000 (2025/26).

• Property sales must be reported and paid within 60 days.

• Rates vary depending on the asset type and your income tax band.

📞 Need Help with Capital Gains Tax?

CGT can be complex, especially with property transactions or multiple disposals in one year. At ASBA Accounting, we help individuals and business owners calculate, report, and minimise their Capital Gains Tax liabilities while keeping everything HMRC-compliant.

👉 Get in touch with us today to make sure you don’t pay more tax than you need to.