Capital Gains Tax Calculator
| Description | Amount (£) |
|---|
How to Calculate Your Capital Gains Tax
Capital Gains Tax (CGT) applies when you sell or dispose of an asset that has increased in value. You pay tax on the profit (gain), not the total amount received. The calculation follows a straightforward process that deducts various allowances and costs before applying the appropriate tax rate.
Step-by-Step Calculation Method
The calculation begins by determining your gross gain. Subtract the original purchase price from the sale price to find the initial profit. From this figure, deduct all allowable costs incurred during ownership, including purchase costs (solicitor fees, stamp duty), selling costs (estate agent fees, legal fees), and enhancement costs (extensions, improvements – but not routine maintenance).
After calculating the gross gain, subtract any allowable losses from other assets disposed of in the same tax year. If you have unused losses from previous tax years, these can also be applied. Next, deduct your annual CGT allowance (£3,000 for the 2025/26 tax year). The remaining figure is your taxable gain, to which the appropriate tax rate is applied based on your income tax band and asset type.
Tax Rates for 2025/26
CGT rates depend on your total taxable income and the type of asset sold. For residential property (excluding your main home), basic rate taxpayers pay 18%, whilst higher and additional rate taxpayers pay 24%. For other chargeable assets including shares, investments, and business assets, basic rate taxpayers pay 18% and higher/additional rate taxpayers pay 24%.
Allowable Costs & Deductions
Various expenses can be deducted when calculating your capital gain, potentially reducing your tax liability significantly. HM Revenue & Customs (HMRC) permits deduction of costs directly related to acquiring, improving, and disposing of the asset.
Acquisition Costs
When purchasing an asset, you may deduct solicitor fees, surveyor fees, stamp duty land tax, and any fees paid to agents or advisers for their professional services in completing the purchase. These costs reduce your taxable gain by increasing your base cost.
Enhancement Expenditure
Capital improvements that enhance the asset’s value can be deducted. This includes extensions, conversions, renovations that add value, and installing new facilities. However, routine repairs, maintenance, decoration, and insurance premiums cannot be deducted as these are considered ongoing costs rather than enhancements.
Disposal Costs
When selling an asset, deduct estate agent fees, solicitor costs, advertising expenses, and valuation fees. Any costs necessarily incurred to successfully complete the sale are allowable deductions.
| Allowable Costs | Non-Allowable Costs |
|---|---|
| Solicitor & conveyancing fees | Routine repairs & maintenance |
| Estate agent commission | Insurance premiums |
| Stamp duty & legal costs | Mortgage interest payments |
| Extensions & improvements | Redecoration costs |
| Professional valuation fees | General wear & tear |
Exemptions & Reliefs
Several exemptions and reliefs can reduce or eliminate your CGT liability. The most significant is Private Residence Relief, which exempts gains on your main home from CGT, provided it has been your only or main residence throughout ownership and you have not used part exclusively for business purposes.
Assets Exempt from CGT
Certain assets are completely exempt from CGT regardless of the gain made. These include your main residence (subject to qualifying conditions), possessions worth £6,000 or less (known as chattels), UK government gilts (bonds), premium bonds and lottery winnings, ISA investments, personal equity plans (PEPs), and qualifying corporate bonds.
Your personal car is exempt provided it was not used for business purposes or held as an investment. Wasting assets with a predictable life of 50 years or less are also exempt, including racehorses and certain machinery.
Transfers Between Spouses
Transfers of assets between married couples or civil partners living together are exempt from CGT. This allows couples to use both annual allowances and potentially transfer assets to the spouse in a lower tax band before disposal, optimising the overall tax position.
Business Asset Disposal Relief
Previously known as Entrepreneurs’ Relief, Business Asset Disposal Relief reduces CGT to 10% on qualifying business assets up to a lifetime limit of £1 million. This applies when disposing of all or part of a business, shares in a personal company, or assets used in a business you have closed.
Reporting & Payment Deadlines
The method and timing for reporting and paying CGT depends on whether you have disposed of residential property or other chargeable assets. HMRC has implemented different reporting systems for each category, with strict deadlines that must be observed to avoid penalties.
Residential Property Disposals
When selling UK residential property (excluding your main home), you must report and pay any CGT due within 60 days of completion. This applies even if the property sale falls within your annual CGT allowance. Use HMRC’s online UK property disposal service to report the sale and pay any tax due. Missing this deadline results in automatic penalties and interest charges.
Other Assets
For shares, investments, and other chargeable assets, report gains through your Self Assessment tax return. The deadline is 31 January following the end of the tax year in which you made the disposal. For example, assets sold during the 2025/26 tax year (6 April 2025 to 5 April 2026) must be reported by 31 January 2027. Payment is also due by this date.
Reporting Losses
Even if you make a loss rather than a gain, you should report it to HMRC. Losses can be carried forward indefinitely to offset against future gains. You have four years from the end of the tax year in which the loss occurred to claim it. Failing to report losses means you cannot use them to reduce future CGT bills.
Strategies to Reduce Your CGT Liability
Several legitimate strategies can help minimise your CGT liability. Planning ahead and making use of available allowances and exemptions can result in substantial tax savings.
Use Tax-Advantaged Accounts
Holding investments within an Individual Savings Account (ISA) or Self-Invested Personal Pension (SIPP) shields them from CGT entirely. ISAs allow you to invest up to £20,000 per tax year (2025/26), and any gains made within the ISA wrapper are completely tax-free. Similarly, pension investments grow free from CGT, although different rules apply when accessing the funds.
Spread Disposals Across Tax Years
If you plan to sell assets worth significantly more than your annual allowance, consider spreading sales across multiple tax years. Each tax year provides a fresh £3,000 allowance. Selling half of a shareholding in one tax year and half in the next allows you to use two years’ worth of allowances, potentially saving thousands in tax.
Transfer Assets to Your Spouse
Married couples and civil partners can transfer assets between themselves without triggering CGT. If one partner has unused annual allowance or pays tax at a lower rate, transferring assets before sale can optimise the tax position. Each partner gets their own £3,000 allowance and may be in different tax bands.
Offset Gains with Losses
Realising losses on underperforming investments in the same tax year as gains allows you to offset them, reducing your overall taxable gain. Losses from previous years can also be carried forward. Consider reviewing your portfolio for loss-making investments that could be disposed of strategically.
Time Sales Strategically
The timing of asset sales can affect which tax year they fall into and your income tax band for that year. If you expect your income to be lower in the following tax year, potentially moving you to a lower tax band, delaying the sale until after 5 April could reduce the CGT rate you pay.
Common Scenarios Explained
Multiple Asset Disposals
When disposing of multiple assets in the same tax year, calculate the gain or loss on each asset separately. Add all gains together and all losses together. Offset total losses against total gains. Only then apply your annual allowance to the net gain. This approach maximises the benefit of your single annual allowance across all disposals.
Inherited Assets
When you inherit an asset, there is no CGT to pay at the point of inheritance. However, when you subsequently sell the inherited asset, CGT may be due. Your base cost is the market value of the asset at the date of the deceased’s death (or the probate value). This means you only pay CGT on any increase in value from the date you inherited the asset to the date you sold it.
Gifting Assets
Giving away assets (except to your spouse or civil partner) is treated as a disposal for CGT purposes, even though no money changes hands. You are deemed to have sold the asset at its market value, and CGT may be due on the gain. The recipient inherits your base cost, meaning they may face CGT when they eventually dispose of the asset.
Frequently Asked Questions
Annual Allowance Changes
The CGT annual exempt amount has changed significantly in recent years, affecting how much tax individuals pay on capital gains. Tracking these changes helps you plan disposals strategically.
| Tax Year | Annual Allowance | Change from Previous Year |
|---|---|---|
| 2022/23 | £12,300 | – |
| 2023/24 | £6,000 | -£6,300 (-51%) |
| 2024/25 | £3,000 | -£3,000 (-50%) |
| 2025/26 | £3,000 | No change |
The substantial reduction in the annual allowance from £12,300 to £3,000 over two tax years has brought many more individuals into the CGT net. Assets that previously could be sold without triggering tax liability now require careful planning. This makes strategies like spreading disposals across tax years and using spouse transfers even more valuable.
Record Keeping Requirements
Maintaining accurate records of all asset transactions is essential for correctly calculating CGT and demonstrating compliance to HMRC if questioned. You must retain records for at least five years after the 31 January submission deadline following the tax year of disposal.
Essential Records to Keep
For each asset, retain documentation showing the purchase date and price, invoices and receipts for all allowable costs, proof of enhancement expenditure, sale documentation including completion statements, and correspondence with professional advisers. For shares, keep contract notes, dividend statements, and records of any corporate actions like bonus issues or splits.
For property, retain solicitor completion statements showing purchase and sale prices, receipts for stamp duty, invoices for improvements and renovations, estate agent invoices, and Land Registry documents. Photographs of improvements can help substantiate claims for enhancement expenditure.
Digital Record Keeping
Digital records are acceptable provided they are accurate and can be easily accessed. Scanning paper receipts and storing them securely in cloud storage ensures they remain available even if physical documents are lost. Spreadsheets tracking asset acquisitions, costs, and disposals help when completing tax returns and can be provided to HMRC if requested.
References
- HM Revenue & Customs. (2025). Tax when you sell property: Work out your gain. GOV.UK. https://www.gov.uk/tax-sell-property/work-out-your-gain
- HM Revenue & Customs. (2025). Capital Gains Tax rates and allowances. GOV.UK. https://www.gov.uk/capital-gains-tax/rates
- Hargreaves Lansdown. (2025). Capital Gains Tax Calculator. https://www.hl.co.uk/tools/calculators/capital-gains-tax-calculator
- Aviva. (2025). Capital Gains Tax Calculator. https://www.aviva.co.uk/investments/investment-account/capital-gains-tax-calculator/
- HM Revenue & Customs. (2025). Capital Gains Manual. GOV.UK. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual