Capital Gains Tax: allowances, rates and wrappers

Capital Gains Tax (CGT) is tax on the profit — the gain — when you sell or dispose of an asset that's gone up in value, such as shares, funds or a property that isn't your main home. It's the gain that's taxed, not the whole amount you get back. This lesson explains the allowances, rates and how tax wrappers fit in — general information, not tax advice.

The annual exempt amount

Everyone has an annual exempt amount — a slice of gains each tax year that's free of CGT. For 2026/27 it's £3,000. Only gains above it are taxable, and the allowance can't be carried into another year, so it resets each 6 April. Losses you've made on other disposals can also be set against gains before tax is worked out.

The 2026/27 rates

Above the exempt amount, the rate depends on the asset and your income. For most assets — shares, funds and the like — the rate is 18% for gains that fall in the basic-rate band and 24% for gains in the higher-rate band. Residential property that isn't covered by Private Residence Relief is taxed at 18% and 24%. A gain stacks on top of your income, so part of a large gain can fall in one band and the rest in the next.

How ISAs and pensions shelter gains

Investments held inside an ISA or a pension are outside CGT entirely — any growth is sheltered, so there's no gain to report however much it rises. That's why the same fund can be taxable in a General Investment Account and completely tax-free in a Stocks & Shares ISA. Outside a wrapper, a separate £500 dividend allowance covers dividend income before dividend tax applies — a different allowance from the CGT one.

The 'bed and ISA' idea

'Bed and ISA' is the name for selling an investment held outside a wrapper and buying it back inside an ISA, so future growth is sheltered. The sale itself is a disposal for CGT, so it can use up some of the annual exempt amount in the year you do it. It's a concept people use to move holdings into a wrapper over time — whether it makes sense depends on the gain, your allowance and your wider position.

This is general information about how CGT works, not personal tax advice. Reliefs, losses and transfers to a spouse or civil partner can all change what's actually due, and GOV.UK or an accountant is the place to confirm your position. The Capital Gains Tax calculator estimates the tax on a disposal using these figures.