How to Work Out Capital Gains Tax UK 2026/27 | Step-by-Step

The Five Steps to Calculate UK CGT

Working out capital gains tax in the UK involves five distinct steps, applied in a specific order. Get the order wrong and you will either overpay or underpay. The five steps are: (1) Calculate the gross gain; (2) Deduct current-year losses; (3) Deduct the annual exempt amount; (4) Work out how much basic-rate band remains; (5) Apply the correct rates. This guide walks through each step in detail with worked examples.

Step 1: Calculate the Gross Gain

The gross gain is the proceeds from the disposal minus the allowable costs. Proceeds means the cash received, or, if the asset is gifted or disposed of below market value to a connected person, the market value at the date of disposal. Allowable costs for most assets are: acquisition cost, incidental acquisition costs (solicitor fees, stamp duty, broker commissions), improvement costs (for property), and incidental disposal costs (estate agent fees, solicitor fees on sale, broker commissions on share sales).

For shares, you cannot choose which shares you are selling, HMRC applies the Section 104 pool rule. All acquisitions of the same share are pooled and averaged. The average cost per share from the pool is used as the acquisition cost per share sold. Check also for same-day and 30-day matching rules before using the pool cost.

For property, the gross gain is straightforward: sale price minus purchase price minus stamp duty on purchase minus capital improvements minus selling costs. If the property is jointly owned (e.g. 50/50 with a spouse), split the proceeds and costs proportionately before calculating each owner's individual gain.

Step 2: Deduct Current-Year Capital Losses

If you have realised capital losses from other disposals in the same tax year, these are deducted from the gross gain. You cannot choose to defer a current-year loss, it must be used in the year it arises. If your losses exceed your gains in a year, the net loss is carried forward to future years.

Losses from previous years (brought-forward losses) are treated differently, see Step 3.

Step 3: Apply the Annual Exempt Amount and Brought-Forward Losses

The annual exempt amount for 2026/27 is £3,000. This is applied after current-year losses. Brought-forward losses from previous years are also applied at this stage, but only to the extent needed to reduce the net gain to the annual exempt amount. You do not waste brought-forward losses against gains that would have been exempt anyway.

Example: Gain after current-year losses = £12,000. Brought-forward losses = £15,000. You apply £9,000 of the brought-forward losses (to bring the gain down to £3,000, which is sheltered by the AEA). Taxable gain = £0. The remaining £6,000 of brought-forward losses is carried forward again.

Step 4: Work Out Your Remaining Basic-Rate Band

The CGT rate depends on how much of the basic-rate band remains after your other taxable income. The UK basic-rate band runs from £12,570 (the personal allowance) to £50,270 (the higher-rate threshold). For CGT purposes, you calculate: £50,270 minus your gross income (or more precisely, £37,700 minus your taxable income after the personal allowance). The result is the amount of gain that can be taxed at 18%.

If your income already fills the basic-rate band (gross income over £50,270), the remaining band is zero, all of the taxable gain is at 24%. If your income is £30,000, your taxable income is £17,430 (£30,000 − £12,570), and the remaining basic-rate band is £37,700 − £17,430 = £20,270. Up to £20,270 of gain is at 18%, and any gain above that is at 24%.

Step 5: Apply the Rates

Apply 18% to the amount of the taxable gain within the remaining basic-rate band, and 24% to the amount above. Add the two figures together to get the total CGT due.

Full worked example, property gain: Jane has a salary of £42,000. She sells a buy-to-let property with a gross gain of £38,000. She has capital losses brought forward of £5,000.

Step 1: Gross gain = £38,000. Step 2: No current-year losses. Step 3: Apply brought-forward losses, need to bring gain down to AEA of £3,000, so apply £35,000 of losses. Taxable gain after AEA = £0. Remaining brought-forward losses = £5,000 − £35,000 ... wait. Losses are only £5,000, so apply all £5,000. Gain after losses = £33,000. AEA reduces to £30,000 taxable gain. Step 4: Jane's taxable income = £42,000 − £12,570 = £29,430. Remaining basic-rate band = £37,700 − £29,430 = £8,270. Step 5: First £8,270 at 18% = £1,489. Remaining £21,730 (£30,000 − £8,270) at 24% = £5,215. Total CGT = £6,704.

Reporting and Paying CGT

Property gains: report and pay within 60 days of completion using HMRC's online property reporting service. Other gains: report through Self Assessment, with the tax due by 31 January following the end of the tax year. For 2026/27 gains, the Self Assessment deadline is 31 January 2028.

You must report all disposals where the total proceeds exceeded four times the AEA (£12,000 for 2026/27), even if there is no tax to pay. This means selling a small shareholding for £13,000 with no gain still requires reporting if you are within Self Assessment. HMRC receives share disposal data from brokers and will investigate mismatches.