Capital Gains Tax Allowance: What It Is and the Current Rates

Sold some shares, a second property or a valuable painting? Before you panic about a tax bill, it's worth knowing that Capital Gains Tax is charged on the profit, not on the money you receive, and the first slice of gains each year is tax free. Here's how GOV.UK explains what you pay it on, the tax-free allowance, the rates for the 2026 to 2027 tax year and how to work out which rate applies to you. It isn't personal tax advice.

What a gain is, and what counts as disposing

GOV.UK describes Capital Gains Tax as a tax on the profit when you sell, or dispose of, an asset that's increased in value. It's the gain that's taxed, not the amount you receive. GOV.UK's example: buy a painting for 5,000 pounds, sell it later for 25,000 pounds, and your gain is 20,000 pounds.

Disposing of an asset isn't only selling it. GOV.UK says it also includes:

• giving it away as a gift, or transferring it to someone else
• swapping it for something else
• getting compensation for it, such as an insurance payout if it's been lost or destroyed

Some assets are tax free, and GOV.UK says you don't usually pay tax when you sell your home. If you sold a UK residential property and you do have tax on gains to pay, you report and pay through a Capital Gains Tax on UK property account.

The tax-free allowance for individuals and trusts

You only pay Capital Gains Tax on your overall gains above your tax-free allowance, called the Annual Exempt Amount. If all your gains in a year are under it, there's nothing to pay. GOV.UK lists these allowances, as of Nov 2026:

Who	Tax-free allowance
Individuals	3,000 pounds
Trusts	1,500 pounds

GOV.UK adds that you may be able to reduce your bill further by deducting losses or claiming reliefs, depending on the asset. Allowances for earlier years are on GOV.UK if you're dealing with an older disposal.

Capital Gains Tax rates for the 2026 to 2027 tax year

The rate depends on your Income Tax band and on who's making the gain. These are the rates GOV.UK gives for gains made from 6 April, 2026:

Who's making the gain	Rate
Higher or additional rate taxpayer	24%
Basic rate taxpayer, on the part that fits within the basic Income Tax band	18%
Basic rate taxpayer, on any part above the basic band	24%
Trustees, or personal representatives of someone who's died	24%
Sole trader, partnership or trustee with gains that qualify for Business Asset Disposal Relief	18%

GOV.UK also notes that you may pay a different rate on gains on businesses than on other assets, and that carried interest received from 6 April, 2026 is charged to Income Tax and National Insurance contributions instead.

Working out your rate as a basic rate taxpayer

If you pay basic rate Income Tax, the rate depends on the size of your gain and your taxable income. GOV.UK sets out four steps:

1. Work out your taxable income: your income minus your Personal Allowance and any other Income Tax reliefs you're entitled to.
2. Work out your total taxable gains.
3. Deduct your tax-free allowance from your total taxable gains.
4. Add what's left to your taxable income. Anything within the basic Income Tax band is taxed at 18%, and anything above it at 24%.

Two GOV.UK worked examples side by side

GOV.UK runs the steps through two examples for the 2026 to 2027 tax year, both with a taxable income of 20,000 pounds and a basic rate band of 37,700 pounds. The figures below are GOV.UK's own.

Step	Example 1	Example 2
Taxable gains	12,600 pounds	52,600 pounds
After the 3,000 pounds allowance	9,600 pounds	49,600 pounds
Added to taxable income of 20,000 pounds	29,600 pounds, below the band	69,600 pounds, above the band
How it's taxed	All at 18%	18% on 17,700 pounds, then 24% on 31,900 pounds
Capital Gains Tax due	1,728 pounds	10,842 pounds

Where the allowance does the most work

The line in GOV.UK's guidance that's easiest to skim past is this: if you have gains charged at more than one rate, you can use your tax-free allowance against the gains that would be charged at the highest rates, for example where you'd pay 24% and 18%. In plain terms, the 3,000 pounds doesn't have to be spread evenly: GOV.UK's rule lets you set it against the gains that would be taxed at 24% rather than those at 18%.

Plain advice on your Capital Gains Tax allowance

Add up every disposal in the tax year, including gifts and swaps, not just sales, then compare the total gain with the 3,000 pounds allowance on GOV.UK's Capital Gains Tax guide before you assume you owe anything. If your gains straddle the basic rate band, follow GOV.UK's four steps, and speak to an accountant or tax adviser if business assets, trusts or property are involved.

If you earn from more than one place, these guides on tax tips for the self-employed, how crypto is taxed and whether side hustles get taxed are a good next read.

Frequently asked questions

What is the Capital Gains Tax allowance?

As of Nov 2026, GOV.UK puts the tax-free allowance, called the Annual Exempt Amount, at 3,000 pounds for individuals and 1,500 pounds for trusts.

What are the Capital Gains Tax rates?

For gains made from 6 April, 2026, GOV.UK says higher and additional rate taxpayers pay 24%, and basic rate taxpayers pay 18% on gains within the basic band and 24% above it.

Is Capital Gains Tax charged on the sale price?

No. It's charged on the gain, the profit you make, not on the amount of money you receive.

Do I pay Capital Gains Tax when I sell my home?

GOV.UK says you don't usually pay tax when you sell your home. If you sell a UK residential property and do owe tax on gains, you report and pay through a Capital Gains Tax on UK property account.

Does giving something away count as a disposal?

Yes. GOV.UK says disposing includes giving an asset away as a gift or transferring it, swapping it, or getting compensation for it, as well as selling it.

What rate do trustees pay on gains?

GOV.UK says trustees and personal representatives of someone who's died pay 24% from 6 April, 2026.