What is capital gains tax and when do you pay it (UK)

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Selling a flat you used to rent out. Cashing in some shares. Even selling a vintage watch for a tidy profit. These all sound like good news — you made money. But in the UK, making money on certain things can trigger a tax bill you didn’t see coming, and the deadline to pay it can be far tighter than you’d expect.

Capital gains tax (CGT) catches a lot of people off guard, not because it’s especially complicated once you understand it, but because nobody tells you about it until you’ve already sold the thing. By then, the gain is spent, the paperwork window is ticking, and HMRC doesn’t care that you didn’t know.

This article explains what CGT actually is, what it applies to (and what it doesn’t), the current allowances and rates, and — crucially — exactly when you need to pay it.

What capital gains tax actually is

Capital gains tax is a tax on the profit you make when you sell or dispose of something that’s gone up in value. It’s not a tax on the full sale price — it’s a tax on the gain.

Example: you bought shares for £5,000 and sold them for £9,000. Your gain is £4,000. CGT is calculated on that £4,000, not the £9,000 you received.

“Disposal” is the official word HMRC uses, and it covers more than just selling. It also includes:

• Giving an asset away (gifting)
• Swapping it for something else
• Transferring it into a trust
• Getting compensation for it (like an insurance payout for something destroyed)

So if you give your adult child a buy-to-let flat instead of selling it, that can still count as a disposal for CGT purposes, even though no money changed hands. HMRC uses the market value at the time.

What you actually pay CGT on

CGT applies to specific types of assets, not everything you own. The most common ones for everyday people:

• Second homes and buy-to-let property — not your main home (more on that below)
• Shares and investments held outside an ISA or pension
• Business assets, if you sell all or part of a business
• Valuable personal possessions worth more than £6,000 when sold (jewellery, art, antiques — this is sometimes called “chattels”)
• Cryptocurrency — HMRC treats most crypto disposals as subject to CGT, not income tax, for individual investors

The big misconception: your main home is usually exempt

This is where a lot of confusion lives. Most people assume CGT applies every time you sell property. It doesn’t — if it’s the home you actually live in, you’re almost always covered by Private Residence Relief, which means no CGT on the sale.

Where it gets complicated:

• If you’ve let out part of the property while living there, part of the gain might be taxable
• If you owned it but didn’t live in it for a period (for example, it was a rental before you moved in, or you moved out and rented it to someone else before selling), part of the gain for that period can be taxable
• Second homes, holiday homes, and buy-to-let properties don’t get this relief at all

So the rule of thumb: sell the home you actually live in, you’re generally fine. Sell anything else — a second property, an inherited house, a long-term rental — and CGT is in play.

What’s completely exempt from CGT

Some things never attract CGT, regardless of how much they’ve gone up in value:

This is actually one of the strongest arguments for using an ISA for your investments where you can — not just the tax-free growth and income, but the fact that you never have to think about CGT on anything inside it, no matter how well it performs. You can check the full rules on what’s exempt at gov.uk/capital-gains-tax.

The annual tax-free allowance

Every tax year, you can make a certain amount of gains completely tax-free before CGT kicks in at all. This is called the annual exempt amount.

As of the 2026/27 tax year, this allowance is £3,000 per person. That’s a sharp drop from where it used to be — it was £12,300 as recently as the 2022/23 tax year, then cut in stages. It now sits at £3,000 and the government hasn’t signalled further changes, but it’s worth checking current figures on gov.uk before you rely on it, since allowances do shift.

Because it’s a personal allowance, married couples and civil partners each get their own £3,000, and assets can often be transferred between spouses tax-free before selling — which effectively doubles the allowance to £6,000 for a couple if used properly.

Current CGT rates

Once you’ve used up your £3,000 allowance, the rate you pay depends on two things: what you sold, and what income tax band you’re in.

*Business Asset Disposal Relief has its own reduced rate, which has been rising in stages and sits at 18% from April 2026, up from 10% a couple of years earlier, up to a lifetime limit of £1 million in gains.

Your rate isn’t fixed — it depends on your total taxable income plus your gain. If adding the gain pushes you from the basic rate band into higher rate territory, part of the gain gets taxed at 18% and the rest at 24%. This is one of the more fiddly bits of CGT, and it’s where a lot of people either overpay or underestimate what they owe.

When you actually have to pay it

This is the part that catches people out most. The deadline depends on what you sold.

Selling UK residential property (a second home or rental property): you must report the gain and pay the tax within 60 days of completion. This isn’t the usual self-assessment timeline — it’s a separate, faster process using HMRC’s “real time” CGT service. Miss it, and you face penalties and interest even if you were planning to declare it properly later through self-assessment.

Everything else — shares, crypto, business assets, valuable possessions: you report it through your self-assessment tax return, for the tax year in which you made the disposal. UK tax years run 6 April to 5 April. If you sold shares in July 2026, that falls in the 2026/27 tax year, and you’d report it on the return due by 31 January 2028 (online filing deadline).

If your total gains in a tax year are under the £3,000 allowance, you usually don’t need to report anything at all — unless HMRC specifically asks, or you’re registered for self-assessment for other reasons, in which case some disposals still need declaring even with no tax owed.

Can you reduce what you owe?

A few legitimate ways CGT bills get reduced, none of which involve anything dodgy:

• Use your annual allowance each year. If you’re sitting on investments with gains and don’t need the full amount right now, selling and rebuying gradually (within the rules) across multiple tax years can use up multiple £3,000 allowances instead of one.
• Offset losses. If you sold something else at a loss in the same tax year — or even in a previous year, if reported — you can offset that loss against your gains, reducing the taxable amount. Losses must be reported to HMRC to be used, even in a year with no gains.
• Transfer assets to a spouse or civil partner before selling, to use both annual allowances.
• Hold investments inside an ISA or pension going forward, so future growth isn’t exposed to CGT at all. You can only put so much into an ISA each tax year (the overall ISA allowance), so this is a gradual shift, not an instant fix for existing holdings.

None of this is about avoiding tax you legitimately owe — it’s about not paying more than necessary by missing an allowance or a loss you were entitled to use.

The bottom line

• If you’re selling a second home, rental property, significant shares, crypto, or valuable possessions, assume CGT might apply and check before you spend the proceeds.
• Property sales have a brutal 60-day reporting and payment deadline from completion — mark this in your calendar the moment you accept an offer, not after you’ve sold.
• Check your position using HMRC’s own guidance at gov.uk/capital-gains-tax or the MoneyHelper website before assuming you’re in the clear or that you owe more than you do.
• If you have investments outside an ISA that have grown significantly, think about whether gradually moving them into an ISA over the coming tax years makes sense, so future gains stop being exposed to CGT entir

Next read: What is an ISA and how does it actually work | https://moneyunpacked.com/what-is-an-isa/