Our September 2026 Spotlight Report focuses on Capital Gains Tax (CGT). A capital gain arises when you sell or otherwise dispose of an asset for more than it cost you to acquire. Rather than taxing the value of the asset itself, CGT is charged on the profit, or gain, that you make. Our full spotlight explores the rules in more detail and can be found here. Below, we summarise some of the key points to be aware of.
What counts as a disposal?
A disposal does not only occur when an asset is sold.
For CGT purposes, a disposal can also arise when an asset is gifted, transferred for less than its market value, exchanged for another asset, or when compensation is received for a lost or damaged asset.
One important exception applies to transfers between spouses or civil partners. In most cases, transfers between spouses and civil partners take place on a no gain, no loss basis. This means that the recipient is treated as having acquired the asset at the same time and for the same cost as the person transferring it.
Calculating your gain
A capital gain (or loss) is generally calculated as the disposal proceeds less the original cost of the asset.
Certain expenditure incurred during ownership may also be deductible. This can include costs of improving or enhancing the asset, helping to reduce the gain that is subject to tax.
Where an asset is gifted or transferred for no consideration, or for less than market value, the gain is usually calculated using the asset’s market value at the date of disposal rather than the amount actually received.
All gains and losses arising during the tax year are netted together to arrive at an overall capital gain or loss for the year. If you make an overall capital loss, it can generally be carried forward and used against future capital gains.
How are gains taxed?
There are two main rates of CGT: 18% and 24%. Any gain that falls within your unused basic rate band is generally taxed at 18%, while gains above that amount are taxed at 24%.
Individuals are also entitled to an annual CGT exemption of £3,000, which can reduce the amount of gain subject to tax. A number of reliefs may also be available, including Business Asset Disposal Relief, Investors’ Relief and Gift Relief, all of which are considered in more detail in our Spotlight Report.
Another important relief is Private Residence Relief (PRR), which may reduce or eliminate the gain arising on the sale of your main home.
Disposal of property
Many people are aware that the sale of a second home can give rise to a capital gain, but there are several situations in which the disposal of property may have CGT implications.
Private Residence Relief is available where a property has been your main residence, reducing the tax owed upon disposal. Relief is also available for certain periods of absence, such as where you are required to work abroad, provided the relevant conditions are met.
Where a property has not been your main residence for the entire period of ownership, the relief may be restricted. Additional complications can arise where part of the property has been let to tenants, used exclusively for business purposes, or includes substantial grounds.
The rules can become particularly complex for married couples and civil partners. A married couple or civil partners can generally nominate only one property between them as their main residence for PRR purposes, even if they own multiple properties and live separately.
Where more than one property is available, an election can often be made to nominate which property should be treated as the main residence. Understanding these rules is important when assessing the potential CGT liability on a property disposal.
Need advice?
Before gifting, transferring or selling a valuable asset, it is important to understand the potential tax consequences and any reliefs that may be available.
If you have any questions about Capital Gains Tax, please get in touch.
