How to Calculate Capital Gains Tax (CGT) in the UK

Capital Gains Tax (CGT) is a tax you pay on the profit (or ‘gain’) made when you sell or dispose of an asset that has increased in value. This can include property, shares, cryptoassets, or business assets. Knowing how to calculate Capital Gains Tax correctly ensures you stay compliant with HMRC and avoid unnecessary penalties.

Work out if you need to pay

1. Identify the Asset and Disposal Date

Capital Gains Tax applies when you sell, gift, exchange, or otherwise dispose of an asset. The disposal date is typically the date contracts are exchanged, not the date funds are received. This is important for reporting the gain in the correct tax year.

2. Work Out the Sale Proceeds

The sale proceeds are the amount you received for the asset. If you gifted the asset, you use the market value on the date of disposal. HMRC expects the valuation to be fair and reasonable.

Read more on market value of the asset

3. Deduct the Allowable Costs

To calculate the gain, deduct any allowable costs from the sale proceeds. These typically include:

• The original purchase price of the asset
• Legal fees, survey costs, and estate agent fees
• Costs of improvement (not general maintenance)

For property, for example, the cost of adding an extension is allowable, but painting or decorating is not.

4. Apply Any Reliefs or Exemptions

You may be entitled to reliefs that reduce the taxable gain. Common examples include:

• Private Residence Relief if the property was your main home
• Lettings Relief in specific cases
• Business Asset Disposal Relief (BADR) for qualifying business disposals
• Gift Hold-Over Relief when gifting business assets

Each relief has specific eligibility rules, so it’s important to review HMRC guidance or seek professional advice.

PPR Relief

5. Deduct the Annual Exempt Amount

Every individual has an annual CGT allowance, known as the Annual Exempt Amount. For the 2025/26 tax year, the allowance is £3,000. Gains up to this amount are tax-free. If your total gains are below the allowance, no tax is due, but you may still need to report the disposal to HMRC in some cases.

6. Work Out the Taxable Gain

Once you’ve deducted all allowable costs, reliefs, and the annual exemption, the remaining figure is your taxable gain. If you’ve sold multiple assets in the same tax year, total your gains and deduct total allowable losses before applying the exemption.

7. Apply the Correct Tax Rate

The tax rate depends on your total taxable income and the type of asset:

• Residential property: 18% for basic rate taxpayers, 24% for higher or additional rate taxpayers
• Other chargeable assets: 10% for basic rate taxpayers, 20% for higher or additional rate taxpayers

To determine which rate applies, add your taxable gains to your taxable income. If this pushes you into a higher tax band, part of your gain may be taxed at the higher rate.

Capital Gains Tax: what you pay it on, rates and allowances

8. Report and Pay CGT to HMRC

For residential property disposals, CGT must be reported and paid within 60 days of completion using HMRC’s online property return. For other assets, gains are declared on your Self Assessment tax return. Deadlines are strict, and interest and penalties may apply if you file late.

Reporting and paying Capital Gains Tax

Example: Calculating Capital Gains Tax on a Buy-to-Let Property

• Purchase price: £200,000
• Selling price: £300,000
• Legal and agent fees: £5,000
• Gain before reliefs: £95,000 (£300,000 − £200,000 − £5,000)
• Annual exemption: £3,000
• Taxable gain: £92,000

If you are a higher-rate taxpayer, the gain on residential property would be taxed at 24%, resulting in a CGT bill of £22,080.

Final Thoughts

Calculating Capital Gains Tax can seem straightforward, but reliefs, losses, and ownership structures can make it complex. Getting it wrong can lead to unexpected tax bills and penalties. Professional tax advice can help ensure you calculate CGT accurately and take advantage of all available reliefs.

For tailored advice on your capital gains and property tax planning, get in touch with a qualified accountant who specialises in UK tax.