What is Capital Gains Tax?

In the fiscal year, 2023-24, twenty three thousand people in Yorkshire paid Capital Gains Tax (CGT), totalling £544 million.

For fiscal year 2025-26, the OBR estimates that CGT will raise £20.3 billion, nationally. This is a relatively small amount compared to other taxes, making up about 2% of tax revenue. But it’s forecasted to rise, and fast, potentially doubling by 2030-1.

For those disposing of assets – whether that’s rental flats or second homes, antique furniture or modern art – CGT is definitely something to be aware of.

What do you pay Capital Gains Tax on?

Simply put, CGT is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

It’s the gain you make that’s taxed, not the amount of money you receive.

For example, if you bought an antique diamond ring for £10,000 and sold it later for £14,000, you’ve made a gain of £4,000. That’s the amount that will be considered for tax purposes.

What does disposing mean?

Disposing of an asset includes:

• selling it
• giving it away as a gift
• transferring it to someone else
• swapping it for something else
• getting compensation for it – like an insurance payout if it’s been lost or destroyed.

What assets do I pay Capital Gains Tax on?

CGT is paid on ‘chargeable assets’.

Chargeable assets include:

• personal possessions (e.g. jewellery, antiques, etc) worth £6,000 or more, except your car
• property that’s not your main home
• your main home if certain conditions apply (e.g. you’ve rented it out or it’s very large)
• shares (but not a PEP or an ISA)
• business assets
• potentially cryptoassets.

If you dispose of an asset you jointly own with someone else, you have to pay CGT on your share of the gain.

What you do not pay Capital Gains Tax on?

You do not pay CGT on the following:

• ISAs or PEPs
• UK government gilts and premium bonds
• Betting, lottery or pools wins
• Carried interest (but you’ll pay Income Tax and National Insurance instead).

What is the Annual Exempt Amount?

You only pay CGT on your total gains above an annual limit. Currently that limit is £3,000.

In our previous example of an antique diamond ring, the gain was £4,000. If there are no other gains to report, then the calculation is as follows:

Gain, £4,000

Annual Exempt Amount, £3,000

Amount to pay tax on, £1,000

Further, you do not usually pay tax on gifts made to spouses, civil partners or a charities.

How much is the tax?

CGT is currently 18% for basic rate taxpayers, and 24% for higher or additional rate taxpayers.

Therefore, for a basic rate taxpayer, who has not used their Annual Exempt Amount yet this year, in the above example, the amount to pay would be £180 (£1,000 x 18%).

This is a very simple explanation of CGT. CGT is often considered to be a complicated area of tax-planning. There are special rules for trusts, when someone dies, overseas assets, non-UK residents, etc. There are ways to decrease the tax liability by deducting losses, or claiming reliefs.

Accountants, financial advisers and lawyers, when managing sales of assets all deal with Capital Gains Tax. If you need further information, please contact Jenny Barron on 01756 692866 or email jenny.barron@awbclaw.co.uk.

Solicitor and Director, Society of Trust and Estate Practitioners.

Further reading:

Can you change a will after a person has died? the simple answer, yes

Inheritance tax planning – 7 key strategies to mitigate tax

Gov.UK: Capital Gains Tax

8 May 2026