What is Capital Gains Tax (CGT)?
Capital gains tax (CGT) is the tax on the profit when you sell an asset that has risen in value — 18% for basic-rate and 24% for higher-rate taxpayers in 2026/27, with the first £3,000 of gains tax-free.
How capital gains tax works in 2026/27
You pay CGT on the gain — sale price minus what you paid — not the whole amount, and only above the £3,000 annual exempt amount (down from £12,300 as recently as 2022). Rates are now 18% if the gain falls within your basic-rate band and 24% above it, for shares and property alike. Your main home is exempt (private residence relief), as are ISAs, pensions, gilts and gambling winnings. Business owners selling up get a reduced 14% rate on the first £1 million of lifetime gains (Business Asset Disposal Relief — rising to 18% from April 2026).
A worked example
You bought shares for £20,000 and sell them for £35,000: a £15,000 gain. Knock off the £3,000 exemption, leaving £12,000 taxable. A higher-rate taxpayer pays 24% — £2,880. Under the Green plan (gains taxed as income) the same gain could cost £4,800 at 40%. Run your own numbers in the capital gains tax calculator.
Why it's controversial
Only around 350,000 people pay CGT in a typical year, but they include some of the wealthiest — and because CGT rates sit well below income-tax rates, people who can convert income into gains pay less tax than workers on the same money. Defenders reply that gains aren't adjusted for inflation and that high CGT discourages investment. Both the Greens (align CGT with income tax) and the Lib Dems (new 20/40/45% bands on gains alone) would restructure it.
Plain-English guide for general information only — not financial, legal or tax advice. Rates are 2026/27 unless stated. Last reviewed 5 July 2026.
Frequently asked questions
What are the capital gains tax rates for 2026/27?
18% for gains within your basic-rate band and 24% above it, on both shares and property. The first £3,000 of gains each year is exempt, and your main home is fully exempt.
Do I pay capital gains tax when I sell my house?
Not on your main home — private residence relief exempts it. You do pay on second homes, buy-to-lets and inherited property you later sell at a gain (18% or 24% on the gain above £3,000).
Which parties would raise capital gains tax?
The Greens would tax gains at your income-tax rates (up to 45–48%); the Lib Dems would create separate 20/40/45% bands on gains alone with a higher £5,000 allowance. Both are analysed with calculators on this site.