Capital Gains Tax UK 2025: Rates, Allowances & How to Reduce

If you’re selling a home you once lived in, or cashing in shares you’ve held for a decade, capital gains tax (CGT) often takes a bite out of your profit. From April 2026, the main rates are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, applied uniformly across most assets including residential property. With the annual exemption now just £3,000, knowing the rules around the main residence exemption and the 6‑year absence rule could save you thousands.

Current CGT rate (property): 18% basic / 24% higher · Annual allowance (2025/26): £3,000 · Main residence exemption: Full if always your main home · 6‑year absence rule: Up to 6 years if you return to live there

Quick snapshot

1Confirmed facts

• CGT rates 2025/26: 18% basic / 24% higher for property and most assets (GOV.UK)
• Annual exempt amount: £3,000 for individuals in 2025/26 (Shorthouse & Martin (chartered tax advisers))
• Full main residence exemption if property was always your only home (GOV.UK)

2What’s unclear

• Future CGT rate changes for non‑property assets after 2025/26 (Prosperity Wealth (tax advisory))
• How potential inheritance‑tax reforms might interact with CGT (Prosperity Wealth)
• Whether future budgets will extend harmonised rates to additional asset classes (Policy speculation) (Prosperity Wealth (tax advisory))
• Interaction of CGT with potential wealth tax introduction (Policy speculation) (Prosperity Wealth (tax advisory))

3Timeline signal

• 6 Apr 2024: allowance cut to £3,000 (GOV.UK)
• 30 Oct 2024: Budget announced harmonised rates (GOV.UK)
• 6 Apr 2025: property rates 18%/24% take effect (Prosperity Wealth (tax advisory))

4What’s next

• Use annual allowance before 5 April each year
• Consider spouse transfers to defer gain
• Check Business Asset Disposal Relief eligibility

Seven key figures define your CGT position in 2025/26:

Metric	Value
Current CGT allowance (2025/26)	£3,000 per individual (Shorthouse & Martin)
Current property CGT rate (basic rate)	18% (GOV.UK)
Current property CGT rate (higher rate)	24% (GOV.UK)
Other assets CGT rate (basic rate)	10% (GOV.UK)
Other assets CGT rate (higher rate)	20% (GOV.UK)
Main residence exemption final period	9 months (GOV.UK)
Maximum absence under 6‑year rule	6 years (job‑related absence also covered if you return) (HMRC Capital Gains Manual)

What is the capital gains tax rate in the UK?

Two rate tiers apply depending on your income tax band and the type of asset. From 6 April 2026, the rates are harmonised across most asset classes.

Rates for residential property gains from 6 April 2026

• Basic‑rate taxpayers: 18% on property gains
• Higher‑rate taxpayers: 24% on property gains
• Mixed‑rate taxpayers: if the gain pushes total income into the higher band, 18% applies up to the basic‑rate threshold and 24% on the remainder (Prosperity Wealth)

These rates apply to chargeable gains arising on disposals of residential property (including second homes and buy‑to‑lets) from 6 April 2025 onwards GOV.UK.

Rates for other assets (shares, crypto, business assets)

• Basic‑rate taxpayers: 10% (unchanged)
• Higher‑rate taxpayers: 20% (unchanged)
• Trustees and personal representatives: flat 24% from 6 April 2026 (GOV.UK)

Before 6 April 2026, rates for shares and other assets remain at 10% basic / 20% higher. After that date they rise to match property rates: 18% and 24% respectively Prosperity Wealth.

Annual allowance and how it affects your liability

• 2025/26 annual exempt amount: £3,000 per individual (Shorthouse & Martin)
• 2023/24 amount: £6,000 — halved in two years
• 2022/23 amount: £12,300 — a 76% reduction over three years

The allowance cannot be carried forward. Gains above £3,000 are taxed at the applicable rate in the same tax year.

The implication: The steep drop in allowance means even modest portfolios now trigger a CGT bill. A £10,000 share gain in 2023/24 was tax‑free; in 2025/26 the same gain attracts tax on £7,000.

What is the 6 year rule on capital gains tax?

The 6‑year rule is a valuable relief for homeowners who move away from their property but intend to return. It treats the period of absence as if you still lived there, preserving the main residence exemption.

How the 6‑year rule works for main residences

• You can be absent from your main residence for up to 6 years and still claim exemption if you return to live there
• The period of absence counts as deemed occupation for CGT purposes
• Only one property can be treated as your main residence at any time (HMRC Capital Gains Manual)

Example: You live in a flat for two years, move abroad for four years, return and live there again for one year, then sell. The entire period of ownership qualifies for main residence relief, because the absence was less than 6 years and you returned.

Conditions: absence, reoccupation, and no other main residence

• You must actually live in the property again after the absence
• During the absence you must not have elected any other property as your main residence
• If you own a second home, you can elect which property is your main home via a written nomination to HMRC (GOV.UK)

What this means: The rule is strict about no alternative main home. Renting abroad while keeping your UK property usually works, but buying another property and living in it would disqualify the absence.

Examples of gains covered by the rule

• A teacher on a 3‑year secondment abroad — full exemption preserved
• A parent moving in with family for 5 years to care for relatives — exemption stands if they return
• A job‑related relocation with no expectation of return — no time limit applies (HMRC Capital Gains Manual)

How do I avoid capital gains tax in the UK?

Legal strategies exist to reduce or defer CGT. Most rely on timing, allowances, and reliefs. Below are the key approaches in a step‑by‑step order.

1. Use your annual CGT allowance (£3,000): Realise gains up to £3,000 per tax year. Unused allowance cannot be carried forward. Consider selling assets in multiple tax years to spread gains (GOV.UK).
2. Apply bed and breakfasting rules and share pooling: You cannot sell shares and immediately buy back the same shares (bed and breakfasting) — a 30‑day gap is required. Shares in the same company are pooled; disposal uses an average cost basis (HMRC Helpsheet 284). Bed and ISA: sell shares and reinvest the proceeds into a stocks & shares ISA within the same tax year to shelter future gains.
3. Offset gains with trading losses: Capital losses can be carried forward indefinitely to offset future gains (GOV.UK). Losses from the same tax year must be used before carried‑forward losses. Report losses to HMRC within 4 years of the end of the tax year.
4. Transfer assets to spouse or civil partner: Transfers between spouses are on a no‑gain/no‑loss basis — no immediate CGT. The receiving spouse inherits the original acquisition cost (GOV.UK). Couples can double the annual allowance by transferring assets before sale.

Using your annual CGT allowance (£3,000)

• Realise gains up to £3,000 per tax year to use the allowance
• Unused allowance cannot be carried forward — use it or lose it
• Consider selling assets in multiple tax years to spread gains (GOV.UK)

The trade‑off: Deliberate selling to use the allowance may incur transaction costs. For small portfolios the saving can outweigh the fees.

Bed and breakfasting rules and share pooling

• You cannot sell shares and immediately buy back the same shares (bed and breakfasting) — a 30‑day gap is required
• Shares in the same company are pooled; disposal uses an average cost basis (HMRC Helpsheet 284)
• Bed and ISA: sell shares and reinvest the proceeds into a stocks & shares ISA within the same tax year to shelter future gains

Trading losses to offset gains

• Capital losses can be carried forward indefinitely to offset future gains (GOV.UK)
• Losses from the same tax year must be used before carried‑forward losses
• You must report losses to HMRC within 4 years of the end of the tax year

Transferring assets to spouse or civil partner

• Transfers between spouses are on a no‑gain/no‑loss basis — no immediate CGT
• The receiving spouse inherits the original acquisition cost (GOV.UK)
• Couples can double the annual allowance by transferring assets before sale

What is the main residence exemption for capital gains tax?

The main residence exemption, or private residence relief, means you generally pay no CGT when you sell your only or main home.

Full exemption if used as only main home

• No CGT due if the property was your main home throughout the entire period of ownership
• The final 9 months of ownership are always treated as a residence, even if you moved out (GOV.UK)
• Part of the garden or grounds up to 0.5 hectares is included (HMRC Capital Gains Manual)

What this means: Home‑owners are the big winners. A £200,000 gain on a main home is completely tax‑free, saving up to £48,000 in CGT for a higher‑rate taxpayer.

Private residence relief rules

• If you let out part of the property, relief may be restricted
• If you used part exclusively for business, that part may be chargeable
• You can nominate one property as your main home if you own two — valid for CGT purposes (GOV.UK)

Letter of election for two homes

• If you own two homes, you can make a formal election within 2 years of acquiring the second property
• Without an election, HMRC decides based on where you spend the most time (GOV.UK)
• Elections can be changed, but the change only applies from the date you notify HMRC

The implication: For owners of multiple properties, a timely election can secure the main residence exemption on the property that will be sold, while the other may become liable to CGT.

What is the capital gains tax allowance and threshold?

The annual exempt amount (allowance) is the profit you can realise before CGT is due. The threshold above which you must report and pay varies.

Annual exempt amount for individuals and trusts

• Individuals: £3,000 for 2025/26 (Shorthouse & Martin)
• Trusts: £1,500 for 2025/26 (Prosperity Wealth)
• Trusts with vulnerable beneficiary: up to £3,000

Threshold for paying CGT

• You must report and pay CGT if your total gains exceed the annual allowance
• If gains are below the allowance but total disposal proceeds exceed £50,000 (for property) or £4× the allowance (for other assets), you may still need to report (GOV.UK)
• Reporting is done through the Real Time Capital Gains Tax service for property disposals within 60 days

Changes to allowance from 2023 to 2026

• 6 April 2023: £12,300 → £6,000 (GOV.UK)
• 6 April 2024: £6,000 → £3,000
• 6 April 2025: no further reduction announced

The pattern: The allowance has been slashed by 76% in three years. What once sheltered a gain of £12,300 now shields only £3,000 — a dramatic shift that pulls many more taxpayers into the CGT net.

Key Timeline of CGT Changes

• 6 April 2023 — Annual exempt amount reduced from £12,300 to £6,000 (GOV.UK)
• 6 April 2024 — Annual exempt amount reduced from £6,000 to £3,000
• 30 October 2024 — October Budget announces harmonised CGT rates for property and other assets from 2026
• 6 April 2025 — Property CGT rates set at 18% basic / 24% higher; Business Asset Disposal Relief rate rises to 14% (GOV.UK)
• 6 April 2026 — Harmonised rates take effect: 18% basic / 24% higher for all assets; BADR rate rises to 18%

What We Know and What Remains Unclear

Confirmed facts

• Current CGT rates 2025/26 as per HMRC guidance (GOV.UK)
• Annual allowance £3,000 for individuals, £1,500 for trusts
• Main residence exemption covers full gain on sale of main home, plus final 9 months
• 6‑year absence rule applies if you return to the property (HMRC Capital Gains Manual)

What’s unclear

• Future CGT rate changes for non‑property assets beyond 2025/26 — HMRC may adjust further
• Impact of potential inheritance tax reforms on CGT planning for estates
• Whether future budgets will extend harmonised rates to additional asset classes
• Interaction of CGT with potential wealth tax introduction

Expert Perspectives

“The main residence exemption means you do not pay Capital Gains Tax when you sell (or give away) your home if you have lived in it as your main home throughout the time you owned it.”

GOV.UK (official tax authority)

“The 6‑year rule allows homeowners to be absent from their property for up to 6 years and still claim the main residence exemption, provided they return to live there. It’s a valuable relief for those with temporary moves.”

Low Incomes Tax Reform Group (independent tax charity)

For UK homeowners and investors, the decision on when to sell and how to use allowances has never been more important. The £3,000 annual exemption disappears if you don’t use it, and the 6‑year rule is a rare chance to escape tax on a property you plan to return to. Brits Dodging Inheritance Tax – Legal Strategies and Calculators offers a broader look at intergenerational planning, while understanding your income band is key — see 45k After Tax UK: Take-Home Pay, Tax Bands & Salary Insights. For the owner of a second home or a portfolio of shares, the choice is clear: plan disposals before April 2026 or face a 60–80% higher tax bill on gains above the shrinking allowance.

Frequently Asked Questions

When do I have to pay capital gains tax?

You must pay CGT on chargeable gains above the annual allowance (£3,000 in 2025/26) when you sell or dispose of an asset. Payment for property is due within 60 days via the Real Time CGT service; for other assets it’s due with your self‑assessment by 31 January after the tax year.

Is capital gains tax deducted automatically from a house sale?

No. You must report the sale to HMRC and pay the tax yourself. For residential property disposals, use the Real Time CGT service within 60 days of completion.

Can I offset capital gains tax with investment losses?

Yes. Capital losses can be deducted from gains in the same tax year or carried forward indefinitely to offset future gains. Losses must be reported to HMRC within 4 years.

Does capital gains tax apply to cryptocurrency?

Yes. Cryptoassets are treated as a chargeable asset for CGT purposes. Gains above the annual allowance are taxed at the same rates as shares (10% basic / 20% higher for 2025/26, rising to 18%/24% from 6 April 2026).

How does capital gains tax work for married couples?

Transfers between spouses are on a no‑gain/no‑loss basis, so no CGT is triggered on the transfer. Each spouse benefits from their own annual allowance, effectively doubling the tax‑free amount for jointly owned assets.

What is the CGT report and pay deadline?

For property: within 60 days of completion. For other assets: by 31 January following the end of the tax year (e.g., gains in 2025/26 are due by 31 January 2027).

Does the 6‑year rule apply if I never return to the property?

No. The exemption only applies if you actually return to live in the property. If you do not return, the period of absence becomes chargeable.