What Is Capital Gains Tax? A Plain English Guide for UK Beginners

You’ve sold some shares at a profit. Or maybe you’re thinking about it. Either way, someone’s mentioned Capital Gains Tax and now you’re wondering what you actually owe.

Let’s strip this down to what you genuinely need to know.

The one-sentence version

Capital Gains Tax (CGT) is a tax on the profit you make when you sell something that’s gone up in value. Not the total sale price — just the profit bit. Buy shares for £2,000, sell them for £3,500, and the taxable amount is the £1,500 difference.

HMRC’s own definition is at gov.uk/capital-gains-tax — it’s one of their better-written pages, worth a skim.

What counts and what doesn’t

CGT applies to “chargeable assets” — a deliberately broad term. The main ones for most people are:

Shares and funds held outside an ISA or pension. Selling shares in your General Investment Account (GIA) on Trading 212, Robinhood UK, or Freetrade is a taxable disposal.

Second properties and buy-to-let (your main home is usually exempt under Private Residence Relief).

Cryptocurrency — HMRC treats crypto as property, not currency. Selling, swapping, or spending it triggers CGT.

Personal possessions worth over £6,000 when you sold them (art, jewellery, antiques). Your car is specifically exempt.

Things that are not subject to CGT: your main home, anything inside an ISA or SIPP, gifts to your spouse, gifts to charity, and government bonds (gilts).

The tax-free allowance

Every individual gets an Annual Exempt Amount — £3,000 for 2025/26 and frozen at that level until at least 2030 according to the House of Commons Library. Gains below this aren’t taxed.

This used to be £12,300 just three years ago. The dramatic cut means people who never thought about CGT before are now caught by it. A single profitable share sale can breach the £3,000 threshold.

It’s use-it-or-lose-it — you can’t carry unused allowance into the next year.

What rate do you pay?

Since the October 2024 Autumn Budget, the rates on shares and most other assets are:

Your capital gains are stacked on top of your income to determine the rate. If adding the gain pushes you over the basic rate threshold, you pay a blended rate — some at 18%, the rest at 24%. Our full rates guide walks through the maths.

ISAs change everything

Gains inside a Stocks and Shares ISA are completely exempt from CGT. No tax, no reporting, nothing. The annual ISA allowance is £20,000 — and as the FCA’s Financial Lives survey has shown, most people don’t use their full allowance.

If you’re investing in a taxable account when you have unused ISA allowance, you’re paying tax unnecessarily. The simplest CGT planning move is to use your ISA.

When do you have to tell HMRC?

You must report your capital gains if your total disposal proceeds exceed £12,000 (even if no tax is due), or if your gains exceed £3,000, or if you want to claim a loss. This is done through the SA108 supplementary page of your self-assessment tax return.

The filing deadline is 31 January after the end of the tax year. For 2025/26, that means 31 January 2027. Our reporting threshold guide explains the rules in detail.

How is the gain actually calculated?

This is where it stops being simple. The UK doesn’t use FIFO (first in, first out) like the US. HMRC has its own share matching rules — same-day matching, the 30-day bed and breakfast rule, and Section 104 pooling — described in HMRC Helpsheet HS284.

For the full walkthrough with worked examples, see our complete CGT calculation guide.

Or skip the manual work entirely: TaxBull applies all the HMRC rules automatically. Upload your broker CSV, get SA108-ready results in seconds.

This guide is for informational purposes only and does not constitute tax advice. Always consult a qualified professional for guidance specific to your circumstances.