Capital Gains Tax (CGT) and income tax are separate taxes that apply to different types of money. Income tax applies to earnings (salary, profits, dividends, interest). CGT applies to the profit when you sell (or "dispose of") an asset for more than you paid for it. The rates, allowances, and rules are different.
What is a capital gain?
A capital gain arises when you dispose of an asset and the proceeds exceed the original cost (plus allowable costs like fees). Common taxable assets include:
- Shares and investments (outside ISAs)
- Cryptocurrency
- Second properties and buy-to-let
- Valuable personal items worth over £6,000
- Business assets
Your main home is exempt (Private Residence Relief). Assets held in ISAs and pensions are also exempt.
CGT rates for 2026/27
CGT rates are lower than income tax rates, but they vary by asset type:
- Shares, crypto, and other assets: 18% (basic rate) / 24% (higher rate)
- Residential property (not main home): 18% (basic rate) / 24% (higher rate)
The Annual Exempt Amount is £3,000 — gains below this are tax-free.
How your income affects CGT rate
Your capital gain is added on top of your income. If your income plus the gain keeps you within the basic rate band (under £50,270), you pay CGT at 18%. If it pushes you into the higher rate band, the excess is taxed at 24%.
Example: income £45,000, gain £10,000 (after exempt amount). You have £5,270 of basic band remaining (£50,270 − £45,000). So £5,270 of the gain is taxed at 18% and £4,730 at 24%.
Key differences from income tax
| Income Tax | Capital Gains Tax | |
|---|---|---|
| Tax-free amount | £12,570 (Personal Allowance) | £3,000 (Annual Exempt Amount) |
| Basic rate | 20% | 18% |
| Higher rate | 40% | 24% |
| National Insurance | Yes | No |
Reporting and paying CGT
Capital gains are reported through Self-Assessment. For residential property sales, you must report and pay within 60 days of completion (via the "Report and pay Capital Gains Tax on UK property" service on GOV.UK).
Check your income tax band
Your income tax band determines which CGT rate applies to your gains. Use the income tax calculator to see which band you fall into and how much basic rate band headroom you have remaining.