Capital gains tax (CGT) rates changed significantly from 6 April 2025. If you are a business owner, director, sole trader, or contractor planning to sell shares, a business, or an investment property, the rates you pay today are different from what they were last year. And they will change again next year.
This article covers the capital gains tax rates 2025 26 in full, including the main rates, Business Asset Disposal Relief (BADR), residential property rates, and the annual exempt amount. We also cover practical planning points for limited company directors, sole traders, and landlords.
What Are the Capital Gains Tax Rates for 2025/26?
The rates depend on two things: what you are selling and your total taxable income for the year.
Here are the rates for the 2025/26 tax year (6 April 2025 to 5 April 2026):
- Basic rate (non-residential assets): 18%
- Higher rate (non-residential assets): 24%
- Residential property (basic rate): 18%
- Residential property (higher rate): 24%
- Business Asset Disposal Relief (BADR): 14%
- Investors' Relief: 14%
Your rate is determined by your total taxable income plus the gain. If the gain pushes you into the higher rate band, you pay the higher rate on the portion above the threshold.
For example: a sole trader in Leeds sells a workshop for a gain of £40,000. Their taxable income for the year is £30,000 (after the personal allowance). Adding the gain gives £70,000. The first £20,270 of the gain falls within the basic rate band (20% income tax band, but 18% for CGT). The remaining £19,730 is taxed at the higher rate of 24%.
Business Asset Disposal Relief (BADR) Rates 2025/26
BADR replaced Entrepreneurs' Relief in 2020. It allows a lower CGT rate on qualifying business disposals, up to a lifetime limit of £1 million.
For 2025/26, the BADR rate is 14%. This is up from 10% in 2024/25. From 6 April 2026, the rate rises again to 18%.
BADR applies to:
- Selling all or part of your business as a sole trader or partnership
- Selling shares in your personal trading company (you must hold at least 5% of the shares and voting rights, and be an employee or officer)
- Assets used by your business after you cease trading (within 3 years)
For a limited company director in Birmingham selling their shares for a £500,000 gain, the BADR rate of 14% means a tax bill of £70,000. Without BADR, the same gain at the higher rate of 24% would cost £120,000. That is a saving of £50,000.
The £1 million lifetime limit has not changed. If you have already used some of your BADR allowance on previous disposals, only the remaining balance benefits from the lower rate.
Residential Property CGT Rates 2025/26
Residential property gains have their own rates. For 2025/26, the rates are 18% for basic rate taxpayers and 24% for higher rate taxpayers.
These rates apply to:
- Selling a second home or buy-to-let property
- Selling inherited property that was not your main home
- Any other residential property that is not your main residence
Your main home is usually exempt under Private Residence Relief. But if you let part of it, used it for business, or it was not your main home for the entire ownership period, part of the gain may be taxable.
For example: a landlord in Bristol sells a buy-to-let flat for a gain of £80,000. Their income is £45,000. Adding the gain takes total income to £125,000. The first £5,270 of the gain is taxed at 18% (£949). The remaining £74,730 is taxed at 24% (£17,935). Total CGT bill: £18,884.
Residential property gains must be reported to HMRC within 60 days of completion. You file the 60-day CGT property return online and pay the tax due within the same window. Missing this deadline means interest and penalties.
Annual Exempt Amount 2025/26
The annual exempt amount for 2025/26 is £3,000. This was reduced from £6,000 in 2024/25 and from £12,300 in 2022/23.
You can make gains of up to £3,000 in the tax year without paying any CGT. If your total gains are below this, you do not need to report them (unless you are filing a tax return for other reasons).
For couples, each person has their own £3,000 allowance. This means a married couple can realise up to £6,000 of gains tax-free in 2025/26, provided the assets are held in both names.
For example: a couple in Edinburgh jointly owns a rental property. They sell it and each has a gain of £3,500. Each uses their £3,000 allowance, leaving £500 each taxed at their respective CGT rates. Total tax bill is far lower than if the property was held in one name only.
How to Calculate Your CGT Bill
Calculating CGT is straightforward in principle, but the detail matters.
- Work out the gain: Sale proceeds minus the original cost, plus any allowable costs (legal fees, estate agent fees, stamp duty, improvement costs).
- Deduct the annual exempt amount: £3,000 for 2025/26.
- Add the gain to your income: This determines whether you pay the basic or higher rate of CGT.
- Apply the correct rate: 18% or 24% for non-residential assets (or residential property), or 14% if BADR applies.
Let us run a worked example. A freelance consultant in London sells shares in their own limited company. The gain is £92,800. They have used £200,000 of their BADR allowance previously. Their taxable income for the year is £35,000.
Step 1: Gain is £92,800. BADR lifetime limit remaining: £800,000. So the full gain qualifies for BADR.
Step 2: Deduct annual exempt amount: £92,800 minus £3,000 = £89,800.
Step 3: Add gain to income: £35,000 + £89,800 = £124,800. Still within the basic rate band for CGT purposes? The basic rate band for income tax is £50,270. But for BADR, the rate is a flat 14% regardless of income level. So the whole gain is taxed at 14%.
Step 4: CGT bill: 14% of £89,800 = £12,572.
Without BADR, the same gain at 24% would be £21,552. That is a saving of £8,980.
Planning Points for Business Owners
The rising CGT rates make planning more important than ever. Here are the key areas to consider.
Timing Your Disposal
BADR rises to 18% from 6 April 2026. If you are planning to sell your business or shares, doing so in the current tax year (2025/26) saves you 4% on the gain. On a £500,000 gain, that is £20,000.
If you cannot complete the sale before April 2026, consider whether you can structure the sale to crystallise part of the gain earlier. For example, selling a tranche of shares now and the remainder later.
Using the Annual Exempt Amount
With the annual exempt amount now at £3,000, it is worth using it each year. If you hold investments or shares outside an ISA, consider realising gains up to the threshold annually. This "bed and breakfast" approach (selling and repurchasing after 30 days) can reduce the eventual CGT bill.
For limited company directors, the same principle applies to shares you hold personally. If you have accumulated shares over time, selling a small number each year to use the allowance can be effective.
Spouse and Civil Partner Planning
Transferring assets to your spouse or civil partner is a no-gain/no-loss event for CGT purposes. This means you can move assets into joint names before selling, effectively doubling the annual exempt amount and potentially using both partners' basic rate bands.
For example: a director in Glasgow holds shares worth £600,000 with a base cost of £100,000. They transfer half to their spouse. They then sell all shares, each realising a gain of £250,000. Each uses their £3,000 allowance and their own BADR lifetime limit. The total tax bill is lower than if the director held and sold all shares alone.
Be careful with the settlement legislation if you transfer shares to someone other than a spouse. HMRC can reallocate the gain back to you if the transfer was not a genuine gift.
Investors' Relief
Investors' Relief applies to shares in unlisted trading companies that were subscribed for (not bought from another shareholder). The rate for 2025/26 is 14%, matching BADR. The lifetime limit is £10 million.
This is relevant for angel investors and early-stage shareholders who subscribed for shares in a company. The shares must have been held for at least 3 years from 6 April 2016 (or from the date of issue if later).
Holding Periods
For BADR on shares in a personal company, you must hold at least 5% of the shares and voting rights for 2 years before the disposal. If you are planning a sale, ensure the holding period is met. Selling early loses the relief entirely.
For sole traders and partnerships, the business must have been trading for at least 2 years before the disposal.
What Has Changed Since 2024/25?
The 2024/25 tax year saw significant changes. The Autumn Budget 2024 raised the higher rate of CGT on non-residential assets from 20% to 24% with immediate effect (30 October 2024). BADR rose from 10% to 14% from 6 April 2025, and will rise to 18% from 6 April 2026.
Residential property rates also changed. The higher rate rose from 24% to 24% (it was already at 24% from the Autumn Budget). The basic rate remained at 18%.
The annual exempt amount dropped from £6,000 in 2024/25 to £3,000 in 2025/26.
The key takeaway: CGT rates are higher than they were two years ago, and they will rise again next year. If you are considering a disposal, doing so in 2025/26 rather than 2026/27 could save you a meaningful amount.
When You Do Not Need to Pay CGT
Not every sale triggers CGT. The following are exempt:
- Your main home (Private Residence Relief applies)
- Assets held in an ISA or SIPP
- Gifts to your spouse or civil partner (no gain/no loss)
- Gifts to charity
- Personal possessions worth £6,000 or less (wasting assets like cars are exempt entirely)
- UK government gilts and qualifying corporate bonds
If your total gains for the year are below £3,000, you do not need to report them unless you are already filing a self assessment return.
How to Report and Pay CGT
How you report depends on what you sold.
Residential property: Use the 60-day CGT property return online. You must file and pay within 60 days of completion. This applies to UK residents selling UK residential property.
Other assets: Report on your self assessment tax return. The return for 2025/26 is due by 31 January 2027 (online). Include the gain on the Capital Gains Tax pages (SA108).
If you are not registered for self assessment, you may need to register if your gains exceed the annual exempt amount. You can do this through HMRC online.
Payment is due by 31 January following the tax year (for non-property gains). For residential property gains, payment is due within 60 days of completion.
Common Mistakes and How to Avoid Them
We see the same issues come up repeatedly with clients. Here are the most common.
Forgetting the annual exempt amount. Do not assume you pay CGT on the full gain. Deduct £3,000 first.
Missing the 60-day window for property. The penalty for late filing starts at £100 and rises. Interest accrues on unpaid tax from the due date.
Assuming BADR applies automatically. You must claim it on your tax return. If you do not, you will pay the higher rate.
Not keeping records of costs. Improvement costs, legal fees, and stamp duty can all reduce the gain. Without records, you cannot claim them.
Transferring shares to a non-spouse without advice. The settlement legislation can undo the tax benefit if HMRC determines the transfer was not genuine.
Ignoring the 2-year holding period for BADR. If you sell shares 23 months after acquiring them, no BADR. You pay the full rate.
What If You Are a Non-UK Resident?
Non-UK residents pay CGT on UK residential property at the same rates (18% and 24%). The 60-day reporting rule also applies.
For non-residential UK assets, non-residents generally do not pay UK CGT unless the asset is used for a UK trade or is UK land. The rules are complex. If you are non-resident and selling UK assets, take specific advice.
Final Thoughts on Capital Gains Tax Rates 2025/26
The capital gains tax rates 2025 26 are higher than recent years, and they will rise again in 2026/27. If you are planning a disposal, the current tax year offers the lowest rates you will see for the foreseeable future.
For limited company directors selling shares, BADR at 14% is still a significant relief. Use it while you can. For landlords and investors, the annual exempt amount is now just £3,000, so using both partners' allowances is more important than ever.
If your gain is large, or the disposal is complex (multiple assets, partial disposals, or associated companies), speak to a qualified accountant before completing the sale. The tax treatment of a disposal is determined on the date of completion, not the date you agree the price.
At Holloway Davies, we are ICAEW qualified and work with business owners across every sector. If you are considering a sale and want to understand your CGT position, get in touch. We can model the tax bill under different scenarios and help you plan the most tax-efficient route.
For more on related topics, see our guides on exit and capital gains planning and director pay and dividends.