Advising clients on Capital Gains Tax (CGT) involves helping them understand the tax implications of disposing of assets, calculating their potential liability, and utilising available reliefs to ensure they pay the correct amount of tax. For accountants, this requires a robust process for tracking asset disposals and accurate software for complex calculations and reporting. 

CGT is not a compliance task you can afford to get wrong. The penalty for incorrect advice is a professional indemnity claim. The penalty for missing the 60-day property reporting window is automatic and immediate. And with rates, reliefs, and the Annual Exempt Amount all having changed materially since 2024, the margin for error on a manually-maintained spreadsheet is narrower than it has ever been. 

Part of a series: This article is a supporting resource within our main pillar: The Definitive Guide to UK Accountancy Practice Compliance (2026/27). For CGT obligations that affect limited companies, see also UK Corporation Tax Filing: A Practice Guide. 

What Are the Capital Gains Tax Rates for the 2026/27 Tax Year? 

⚠️ Important note for practitioners: The CGT rate structure changed fundamentally in the Autumn Budget of October 2024. Rates that many advisors still carry in their mental model — 10%/20% for most assets, 18%/28% for residential property — no longer apply. The correct 2026/27 rates are shown below. 

Since 30 October 2024, CGT rates on virtually all asset classes have been unified. Residential property no longer carries a premium rate over shares or other assets. The current position for the 2026/27 tax year is: 

Whether a client pays 18% or 24% depends on whether their taxable gain — when added to their taxable income — falls within or above the basic rate band (£50,270 for 2025/26). Gains straddling the threshold are taxed at both rates. This calculation has to be done individually for every disposal, for every client. 

The Annual Exempt Amount stands at £3,000 for 2026/27 — frozen until at least 2030. It was £12,300 as recently as 2022/23. That reduction alone has significantly expanded the number of clients with a reportable and taxable CGT position. 

Business Asset Disposal Relief: the direction of travel matters 

BADR has increased in cost every year for the past two years: 10% in 2024/25, 14% in 2025/26, and now 18% from 6 April 2026. The lifetime limit remains £1 million, but with the standard higher rate at 24%, the relief now saves only 6 percentage points — down from 14 percentage points two years ago. 

The maximum BADR saving in 2026/27 is £60,000 per person. That is still worth planning around, but the window of opportunity to advise clients on exit timing may be narrowing. Any client considering a business sale should be having that conversation now, with realistic expectations about what BADR can deliver. 

A Practitioner’s Guide to Key CGT Reliefs 

Understanding which reliefs apply — and whether the conditions are met — is where advisory value is created and where errors are made. The reliefs below are not mutually exclusive and often need to be considered together. 

Business Asset Disposal Relief (BADR) 

BADR reduces the CGT rate to 18% on qualifying business disposals, up to a lifetime limit of £1 million. 

For a company shareholder, the qualifying conditions that must be met throughout the 2-year period ending on the disposal date are: 

• Employee or officer of the company for at least 2 years
• Held at least 5% of ordinary share capital and voting rights for at least 2 years 
• Entitled to at least 5% of distributable profits and assets on a winding up 

For sole traders and partners, the business must have been trading for at least 2 years and the disposal must be of the whole or part of that business. 

The 5% share requirement is the most common disqualifying factor. Dilution events — including new share issues ahead of a sale — can inadvertently break the conditions. This is a planning point that should be raised with any client who holds company shares and anticipates a liquidity event. 

Private Residence Relief (PRR) 

PRR exempts gains on the disposal of a client’s only or main home for the period it was occupied as their principal residence. 

Where the property was the main home throughout the entire period of ownership, the gain is fully exempt. Where the client has lived there for only part of the ownership period, the gain is time-apportioned: the proportion relating to actual residence (plus the final 9 months of ownership, which are always deemed residence) is exempt. 

Periods of absence that qualify as deemed residence include: 

• Up to 3 years for any reason 
• Any period working abroad in any employment
• Up to 4 years where an employer requires the client to work away from home 

Where a client has more than one home, they can elect which is their main residence for PRR purposes — but the election must be made within 2 years of acquiring the second property. Missed elections are a common and expensive oversight. 

Other Reliefs to Consider 

Gift Hold-Over Relief applies where an asset is gifted rather than sold. Normally, a gift triggers CGT on the difference between market value and cost. Hold-Over allows the gain to be deferred — the donor pays no CGT, but the recipient takes on a lower cost base. The gain is effectively transferred, not eliminated. The interaction with IHT must always be assessed before this route is recommended. 

Business Asset Rollover Relief allows a business owner to defer CGT on the disposal of a qualifying asset (typically land, buildings, or fixed plant used in the trade) if the proceeds are reinvested in a new qualifying asset. The reinvestment window is 12 months before to 36 months after the disposal. Partial reinvestment creates partial deferral. This is particularly relevant for clients restructuring business premises or machinery. 

The CGT Reporting Workflow: From Calculation to Submission 

The administrative complexity of CGT advice has increased substantially since 2020. There are now two distinct reporting routes, different deadlines, and an annual reconciliation requirement that catches many practices out. 

Real-Time CGT Reporting for UK Property 

Any disposal of UK residential property where a taxable gain arises must be reported — and the CGT paid — within 60 days of completion. This has been the rule since 27 October 2021. 

The report is submitted via HMRC’s online UK Property Account. It is separate from Self Assessment. A client who is registered for Self Assessment must complete both the 60-day return and the SA return. The 60-day return is not a draft — it is a payment on account against which the final liability is reconciled through SA. 

Where PRR covers the entire gain, no 60-day return is required. Where it covers only part of the gain, the return is still required. 

Penalties for missing the 60-day window are automatic: 

• Day 1 late: £100 
• 6 months late: £300 or 5% of tax (whichever is higher)
• 12 months late: a further £300 or 5% of tax 

These penalties apply even where no additional tax is due. For a client selling a buy-to-let, receiving the completion statement and then putting the paperwork to one side for “the January return” is a common and costly mistake — and one that falls to the practice when the client assumed their accountant would handle it. 

Reporting Other Gains via Self Assessment 

Gains from shares, business assets, and other non-property disposals are reported on the SA108 Capital Gains Summary supplementary pages of the annual Self Assessment return, with a filing and payment deadline of 31 January following the end of the tax year. 

The complexity here lies in the calculation, not the filing. A client who has disposed of shares across multiple transactions over a tax year requires a proper Section 104 pool calculation — tracking weighted average cost across all acquisitions, applying the bed-and-breakfast matching rules for same-day and 30-day repurchases, and splitting the gains correctly if they straddle the basic and higher rate bands. 

A gain of £50,000 on a share portfolio, for a client with £38,000 of taxable income, is not simply 18% or 24%. It is 18% on the first £12,270 (the headroom to the basic rate band) and 24% on the remaining £37,730. Getting that wrong in a spreadsheet is easy. The error is invisible until HMRC queries it. 

The Real Cost of Manual CGT Calculation 

The CGT advisory workflow has two distinct failure modes. Both are expensive. 

The first is a calculation error. CGT spans multiple asset classes, multiple rate bands, and multiple reliefs — often applied simultaneously on the same disposal. A single formula error in a spreadsheet can misapply a relief, use the wrong rate, or omit an allowable cost. The client gets an incorrect tax bill. If they overpay, they may never know. If they underpay, the exposure falls on the practice when HMRC investigates. 

The second is a process failure. Missing the 60-day property deadline. Failing to spot that BADR conditions are not met before the disposal completes. Not identifying that a client’s share sale triggers matching rules that increase the gain. Not reconciling the 60-day payment with the SA liability. These are not obscure edge cases — they are regular occurrences in practices that rely on manual processes and calendar reminders. 

The professional indemnity exposure from CGT advice errors is real. HMRC’s reduced Annual Exempt Amount means more clients have reportable gains. The unified rate structure means fewer obvious shortcuts. And with BADR now at 18%, exit planning conversations with business-owning clients carry more weight — and more responsibility — than before. 

The Solution: How IRIS Personal Tax Ensures Accurate CGT Reporting 

This is where a technology investment in professional tax software earns its return. 

IRIS Personal Tax automates CGT calculation across all asset classes — shares, property, business assets, and mixed portfolios — applying the correct rates, reliefs, and matching rules without requiring the preparer to manually build and maintain those calculation structures. 

Within the IRIS Personal Tax CGT computation module, the workflow for each client looks like this: 

• Asset disposals are entered once, with full cost base information — acquisition cost, enhancement expenditure, allowable disposal costs 
• The system automatically applies the correct Section 104 pool logic for share disposals, including same-day and 30-day matching rules 
• PRR calculations are handled by inputting the ownership and occupation periods — the exempt fraction and chargeable gain are computed automatically 
• BADR eligibility is flagged with reference to qualifying conditions, with the relief applied at the correct rate for the relevant tax year 
• The Annual Exempt Amount and current year losses are applied in the most beneficial order 
• The resulting liability is split correctly across the basic and higher rate bands based on the client’s income position 

For residential property disposals, IRIS Personal Tax populates the 60-day UK Property Return directly from the same calculation, eliminating the need to re-enter data into HMRC’s online portal separately. The estimated CGT figure used for the 60-day payment and the final SA figure are linked — so any adjustment at SA stage automatically flags the discrepancy for review. 

For practices operating within the IRIS Accountancy Suite, the CGT data within Personal Tax sits alongside the client’s income tax position, pension contributions, and other SA workings. The rate band calculation that determines whether a gain is taxed at 18% or 24% — or both — is done automatically, using the client’s total taxable income as the base. There is no separate spreadsheet. There is no manual check. 

The practice benefit is not just accuracy. It is speed, consistency, and the ability to provide advisory output — modelling the CGT impact of different disposal timings, asset sequencing, or spouse-transfer strategies — within the same tool used for compliance. 

CGT Advisory: Frequently Asked Questions 

What assets are exempt from Capital Gains Tax? 

The main CGT exemptions are: your client’s only or main home (subject to PRR), assets held within an ISA or pension, UK government gilts, personal use motor vehicles, cash, prizes and gambling winnings, and assets transferred between spouses or civil partners (which are treated as no gain/no loss transfers). Personal chattels with a value below £6,000 are also exempt, with marginal relief applying for values between £6,000 and £15,000. 

How do you calculate the cost basis of an asset? 

The cost basis is the original acquisition price plus all allowable costs — solicitor and surveyor fees on purchase, SDLT (stamp duty), and any enhancement expenditure (capital improvements, not repairs or maintenance). For shares, the Section 104 pooling rules apply: shares of the same class in the same company are pooled, and the cost basis is the weighted average of all acquisitions. Disposal proceeds are matched against this average cost. The same-day rule and the 30-day bed-and-breakfast rule take priority over the pool for matching purposes. 

Can capital losses be carried forward? 

Yes. Capital losses that cannot be relieved against gains in the same tax year are carried forward indefinitely against future gains. Crucially, carried-forward losses are applied after the Annual Exempt Amount — they cannot be used to shelter gains that would otherwise be covered by the AEA. Losses must be formally claimed on the Self Assessment return within 4 years of the end of the tax year in which they arose. Unclaimed losses are time-barred and permanently lost. Advisors should review clients’ SA history for unclaimed losses, particularly given the AEA reduction in 2023 and 2024 which may have left losses unreported. 

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By Alan Gregory | October 4, 2021 | 8 minutes of reading

Although most taxpayers understand that their income is subject to income tax, many are not sure how to treat the sale of a capital asset, such as property (that is not your house) or stocks. Additionally, changes to capital gains tax (CGT) reporting over recent years have further complicated matters and left many taxpayers confused.

You probably came across this guide while searching for the answer to the question “what is capital gains tax?” » This is probably because it was mentioned to you because you have just sold a valuable asset or are considering selling it.

Well, you’ve come to the right place as this easy to digest article provides a comprehensive overview of capital gains tax for UK residents, explaining what capital gains tax is , what assets it applies to, how much CGT is and who should do it. pay it.

What is capital gains tax?

Simply put, when you sell an item you own and it has increased in value, you may be liable for tax on the amount of the increased value. This tax is Capital Gains Tax (CGT).

Whether or not you have to pay UK capital gains tax on the sale of your asset will be determined by several factors which are discussed in more detail below.

Who pays capital gains tax?

You may be wondering if CGT is separate from income tax. Individuals pay income tax on their income (e.g. salary, profits from self-employment, rental income). Capital gains tax, on the other hand, applies to capital gains resulting from the sale of taxable assets. Common examples of taxable assets include stocks, property and land. CGT can apply both when an asset is sold and when it is gifted.

As UK resident taxpayers are generally subject to capital gains tax on their worldwide gains, sales of taxable assets abroad (e.g. an overseas rental property) are also subject to UK CGT on disposal.

Note that businesses do not pay capital gains tax. Instead, they pay Corporation tax on their taxable earnings.

Exempt assets

Not all disposals result in a capital gains tax liability. Let’s look at some examples of what is exempt from CGT.

One of the most common exemptions is the transfer of principal residence (where the property has been a taxpayer’s principal residence throughout their ownership and has not been used to produce income – e.g. example by renting it out or being used as a place of business).

Another well-known situation where CGT does not arise is where an individual transfers assets to their spouse or civil partner. Such transfers are generally considered to be at zero gain/loss.

Some asset disposals are also exempt from CGT – HMRC guidance provides a high-level summary.

How much is the capital gains tax?

Capital gains tax applies to the net increase resulting from the disposal of an asset. The amount of CGT you will have to pay depends on several factors which we will discuss.

How to calculate CGT

In its simplest form, CGT is calculated by taking the amount paid to acquire the asset and deducting this “cost basis” from the net proceeds resulting from the sale.

In practice this calculation can be more complicated, for example where an asset is being donated, capital losses are being claimed or where only partial private residence relief is available on a property sale. For more complicated situations, it may be helpful to seek professional advice.

Once the net gain has been calculated, the taxpayer must consider the annual exemption amount (AEA) available. The AEA is a CGT allowance, meaning that no capital gains tax is payable on gains that fall within the AEA.

Now you know how to calculate capital gains tax. If you think you overpaid, check out our guide to claim back tax.

What is the capital gains tax allowance?

The AEA threshold is currently £12,300 for individuals in 2021 (at the time of writing, October 2021). The government has confirmed that this rate will be frozen until April 5, 2026.

What percentage does the CGT represent?

The capital gains tax rate applicable to a transfer depends on the property and tax status of the seller.

When the property is a residential building, the CGT rate is either 18% or 28%. The 18% rate applies to basic rate taxpayers, while the 28% rate applies to higher and additional rate taxpayers.

In the event of a sale of other taxable assets, the CGT rates are lowered to 10% or 20% respectively depending on the taxpayer’s rate band.

Taxpayers can also access specific capital gains tax reliefs when certain conditions are met. Eligible assets may, for example, be eligible for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) which applies a CGT rate of 10% on eligible earnings up to a lifetime allowance of £1 million.

When do you pay capital gains tax?

The legal deadline for paying capital gains tax is January 31 following the tax year of the transfer.

If the taxpayer pays a deposit, the capital gain is not considered part of the POA. The full CGT balance is due by January 31.

Penny sells its shares in December 2021, realizing a net capital gain after the annual exempt amount of £30,000. Penny is a higher rate taxpayer, meaning CGT of 20% (£6,000) is payable. This amount must be paid no later than January 31, 2023.

The exception to this rule is the sale of residential property in the UK. In such cases, the disposal must generally be reported to HMRC and the associated CGT paid within 30 days of the sale being completed.

Declaration of transfers

If a taxpayer makes a taxable disposal, subject to limited exceptions, that disposal must be reported to HMRC.

This is usually done by filing a self-assessment tax return and completing the additional capital gains tax pages.

An individual sells an investment property abroad in January 2022 and realizes a net capital gain after all reliefs and allowances of £100,000. This disposal must be reported in their 2021-22 self-assessment tax return. The filing deadline is October 31, 2022 if you file a paper return, or January 31, 2023 if you file online.

If this is an individual’s first self-assessment return, the deadline to register for self-assessment is October 5 following the end of the relevant tax year.

Exceptions to transfers

However, there are certain exceptions. For example, a taxable gain below the AEA does not need to be declared.

If a taxpayer is not in self-assessment, or is in self-assessment and wishes to pay the CGT due on a disposal early, the Real Time Capital Gains Tax service can be used to declare capital gain on a disposal other than the United Kingdom. residential property.

If a taxpayer uses the Real-Time Service and (apart from the assignment) does not need to file a self-assessment tax return, then by declaring the gain via the Real-Time Service, no tax return should not be produced. Taxpayers who are self-assessment must still report the disposal on their tax return, even if they use the real-time service.

Declaration of transfers of property

There are additional reporting requirements to consider when disposing of a residential property in the UK.

For UK tax residents, the disposal of UK residential property (e.g. rental property) from 6 April 2020 must be reported to HMRC via Capital Gains Tax in the UK Property Account. The deadline for declaring the transfer and paying the CGT due is 30 days from the completion of the sale.

There are some exceptions for UK residents. Where a disposal of a UK residential property is exempt from CGT (e.g. the sale of the main residence) or where the disposal does not trigger any CGT liability through the AEA or use of capital losses , the disposal does not need to be declared via CGT on the UK property account.

However, this is not an optional declaration form; where a taxpayer meets the criteria, the disposal must be reported via CGT to a UK property account on time.

Where a taxpayer is not in self-assessment and (apart from disposal) does not need to file a self-assessment tax return, no tax return is necessary if the gain is declared via CGT to a UK property account. However, self-assessment taxpayers must still declare the disposal on their tax return, in addition to reporting the disposal via CGT on the UK property account.

10 key points to remember for the CGT

1. CGT can apply both when an asset is sold or given away.
2. The AEA (Annual Exempt Amount) is currently £12,300 for individuals in 2021.
3. One of the most common CGT exemptions is the transfer of the main residence.
4. Capital gains tax applies to the net increase resulting from the disposal of an asset.
5. Where the property is residential property, the rate of CGT is either 18% (for basic rate taxpayers) or 28% (for higher/additional rate taxpayers).
6. When other taxable assets are sold, the CGT rates are much lower, at 10% or 20% respectively.
7. The legal deadline for paying capital gains tax is January 31 following the tax year of the transfer.
8. Reporting disposals is usually done by filing a self-assessment tax return and completing the additional capital gains tax pages.
9. A taxable gain below the AEA does not need to be declared.
10. There are additional reporting requirements to consider when disposing of a residential property in the UK.

At IRIS, we understand how confusing tax can be, even for the most experienced people. Our area of ​​expertise is tax software which simplifies tax declaration for individuals and professionals. For help with CGT, look no further than our latest cloud solution, IRIS Elements.

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