How Your Salary Affects Your CGT Rate — The Band Calculation Explained

The CGT rate you pay isn’t fixed — it depends on your total taxable income for the year. Your salary, pension income, rental income, and dividends all feed into the calculation. Getting this wrong is one of the most common errors on self-assessment returns.

How the band calculation works

Your capital gains are stacked on top of your other income. The portion of your gains that falls within the basic rate band is taxed at 18%. Anything above is taxed at 24%.

The basic rate band for 2025/26 is £37,700 (as confirmed in the HMRC rates and allowances tables). Your personal allowance is £12,570. So the basic rate threshold is £50,270 of gross income.

The calculation:

1. Start with your taxable income (salary minus personal allowance).
2. Add any taxable dividends above the £500 dividend allowance.
3. See how much of the £37,700 basic rate band is left.
4. That leftover is your “headroom” — gains within it pay 18%.
5. Anything above pays 24%.

Worked examples

Example 1: Comfortable within basic rate

Sarah earns £30,000. After the £12,570 personal allowance, her taxable income is £17,430. She has £20,270 of basic rate headroom (£37,700 − £17,430). Her taxable capital gain (after £3,000 exemption) is £5,000.

The entire £5,000 fits within her headroom → all taxed at 18% → £900 CGT.

Example 2: Pushed into higher rate

James earns £48,000. Taxable income: £35,430. Basic rate headroom: £2,270 (£37,700 − £35,430). His taxable gain is £8,000.

First £2,270 at 18% = £408.60
Remaining £5,730 at 24% = £1,375.20
Total CGT: £1,783.80

If James had earned just £2,270 less, his entire gain would have been at 18% — saving him £343.80. This is why timing matters.

Example 3: Already a higher-rate taxpayer

Rebecca earns £65,000. She’s already above the basic rate band. Zero headroom. Every pound of capital gain pays 24%.

Her £8,000 taxable gain → £1,920 CGT.

Scottish taxpayers

If you’re a Scottish taxpayer, your income tax rates and bands are different (19%, 20%, 21%, 42%, etc.) — but CGT rates are the same across the UK. CGT is not a devolved tax. The Scottish income tax bands are only used to determine whether you’re a “basic rate” or “higher rate” taxpayer for CGT purposes. The Low Incomes Tax Reform Group confirms this point explicitly.

Dividends complicate things

Taxable dividends (above £500) sit between your salary and your capital gains in the stacking order. High dividends can eat into your basic rate headroom, pushing more of your gains into the 24% bracket. See our dividend tax guide for the interaction.

Planning around the band

If you’re near the basic rate boundary, timing your disposals can help:

Spread sales across tax years. Selling everything in one year might push you into 24%. Splitting the sales across two years uses two annual exemptions and keeps more gains at 18%.

Use your spouse’s band. If your spouse is a basic-rate taxpayer or non-taxpayer, transferring assets before selling uses their lower rate.

Salary sacrifice into your pension. Pension contributions reduce your taxable income, increasing your basic rate headroom for CGT. A £5,000 pension contribution could move £5,000 of gains from 24% to 18%, saving £300.

Use TaxBull’s sell simulator to see exactly where your gains fall relative to the rate boundary before you sell.

This is general information only. Tax band calculations interact with many factors. Consult a tax professional for personalised advice.