How capital gains tax is worked out
- Gain = sale proceeds − cost, where cost includes the purchase price, buying and selling fees, stamp duty and capital improvements.
- Deduct capital losses from the same year, then losses carried forward.
- Deduct the £3,000 annual exempt amount.
- Find your unused basic rate band: £37,700 minus your taxable income after the personal allowance. Gains in that space are taxed at 18%; the rest at 24%.
- Business Asset Disposal Relief taxes qualifying business disposals at a flat 18% (2026/27) up to a £1 million lifetime limit.
Worked example: shares sold with a £25,000 gain
£25,000 gain, salary £40,000, England, 2026/27
After the £3,000 exemption, £22,000 is taxable. A £40,000 salary leaves £10,270 of basic rate band unused (£37,700 − £27,430), so £10,270 is taxed at 18% and the remaining £11,730 at 24%. Total CGT: £4,663.80.
Capital gains tax£4,663.80
- Taxable gain
- £22,000after £3,000 allowance
- Effective rate on the gain
- 18.66%
- Kept after tax
- £20,336
- Gain
- £25,000.00
- Less annual exempt amount
- −£3,000.00
- Taxable gain
- £22,000.00
- At 18% (within unused basic band)£10,270 of gain
- £1,848.60
- At 24%
- £2,815.20
- Capital gains tax
- £4,663.80
The same gain for a higher-rate taxpayer would be taxed entirely at 24%: £5,280.00.
What changed
The main rates rose from 10% and 20% to 18% and 24% for disposals from 30 October 2024, matching the rates for residential property. Business Asset Disposal Relief rose from 10% to 14% on 6 April 2025 and to 18% on 6 April 2026. The annual exempt amount has been £3,000 since April 2024, down from £12,300 in 2022/23.
Tips
- Use ISAs and pensions: gains inside them are tax-free.
- Use both spouses’ allowances by transferring assets between you before sale (transfers between spouses are tax-neutral).
- Spread disposals over two tax years to use two annual exemptions.
- Keep records of costs and improvements — they reduce the gain.