Capital Gains Tax – CGT – was introduced in 1965 by Chancellor James Callaghan, with the stated objective of curbing speculation specially in property and ensure fairness between earned income and capital income.
Cynics might suggest its real objective was actually to raise money for the Treasury.
Back in the 60’s CGT (at a flat rate of 15% and a £1000 threshold) it was something that only tended to bother wealthy speculators. In the years since, it has gone up, down, been aligned with income tax rates, complicated by annual exemptions, and continuously adjusted by various governments.
It has also gone from a tax on a wealthy few to something that can affect almost all of us.
At Continuum we are asking what it means in 2026 – and the answer is, ‘it’s complicated’.
When do you pay CGT?
You may be liable to pay Capital Gains Tax when you sell or give away assets that have increased in value.
But what you pay won’t be based on the total proceeds of the sale. It only applies to the increase in its value, or the profit you’ve made, since you’ve owned it. This is your ‘gain’.
So, if you bought £12,000-worth of shares and sold them for £20,000, you make a £8,000 gain. This could be subject to CGT.
But not necessarily.
You have an allowance, known as the Annual Exempt Amount (AEA). For the 2025/26 tax year the AEA has been reduced to £3,000. If that £8000 was the only capital gain you made in the year, you might only need to pay tax on £5000.
What assets do you pay CGT on?
CGT can be charged on assets including investments, property apart from your main home – and chattels.
Chattels is a fancy word for moveable and tangible possessions, such as furniture, antiques, art or jewellery. For the purposes of CGT, you only need to consider chattels worth more than £6,000, and to add more complication, some chattels, like private cars, things with a limited life including things such as antique clocks and watches.
More importantly CGT applies to financial assets, like shares and investments, if they aren’t held in ISAs or pensions that shelter them from tax.
How much CGT will you pay?
Here’s another layer of complication. The rate of CGT you pay will depend on your rate of income tax.
As basic rate tax bracket you will be taxed at a rate of 18 % for disposals made on or after 6 April 2026, on all capital gains above your Annual Exempt Amount.
But be careful. If your taxable gain pushes your income over the £50,270 higher rate threshold you will pay tax at the rate for a higher rate taxpayer. Higher or additional rate taxpayers will be taxed at a rate of 24%.
Fortunately, capital gains from all sources are now charged at the same rates. Before October 2024, a higher rate of CGT was charged on the sale of residential property than other assets.
How do you calculate your gain?
Calculating gains on single assets like property isn’t too complicated.
A capital gain is simply what you sold an item for, less what you paid for it. You may be able to deduct some expenses such as transaction or estate agent fees, or money spent on improving the asset. You just need to keep good records when you buy an asset or spend money on improving it. If it is an asset you inherited, rather than purchased, the CGT calculation will be based on its market value at the date you took ownership.
It’s not quite so straightforward with shares.
You may have acquired them over a period of time at different prices, but they will be regarded as one asset when you dispose of them, so you’ll need to calculate an average cost.
The government website includes guidance on how to calculate gains on shares, including working out the value of each share when selling.
How do you pay CGT?
If you sell an asset and have made a taxable gain, you’ll need to declare it to HMRC on your personal self-assessment tax return. For residential property, you may be required to file an additional return within 60 days of selling.
For most assets, the CGT is payable on or before 31 January with the tax return, but for residential property the payment is due 60 days after the property sale. Failure to declare gains could mean a hefty fine.
Can you cut the cost of CGT?
Inflation can mean huge increases in the value of assets over the years, leaving you exposed to high levels of CGT.
Fortunately, there are ways to help mitigate the costs you face. Making a loss on the disposal of other assets might let you reduce your overall gains, and consequently the tax you owe, while careful timing of the sale of assets could let you take advantage of several years’ worth of Annual Exempt Amount.
Of course, as CGT is complicated, so is reducing its impact. An appropriate solution may be to call us at Continuum to let us develop an asset disposal solution to help to reduce your tax bill.
To get our professional advice, call us today.
Capital Gains Tax: what you pay it on, rates and allowances: Overview – GOV.UK
Report and pay your Capital Gains Tax: What you need to do – GOV.UK
Capital gains tax: background history
This article is intended for general guidance only and is based on the opinion of Continuum it does not constitute financial advice. Individual circumstances vary, and you should consider seeking advice from a regulated financial adviser before making any decisions about your pension or retirement planning.
The Financial Conduct Authority does not regulate taxation advice.
Levels and basis of reliefs from taxation are subject to change and their value depends upon your personal circumstances. We recommend that the investor seeks professional advice on personal taxation matters.
The value of an investment can go down as well as up. When investing Capital is at risk.
