UK Self Assessment From Scratch — Part 5: Capital Gains Tax Step-by-Step

Quick answer

Capital Gains Tax applies when you dispose of a chargeable asset for more than its acquisition cost. For UK tax-resident individuals in 2025/26:

• First £3,000 of gains: tax-free (annual exemption).
• Gains in the basic-rate band slice: 18%.
• Gains in the higher-rate band slice: 24%.

You declare it on your Self Assessment return (form SA108). For UK residential property, there's also a separate 60-day reporting requirement to HMRC online.

This is Part 5 of 8 in our Self-Assessment From Scratch series.

When CGT applies

A disposal is broader than just selling for cash. It includes:

• Selling shares, crypto, property (not your main home), antiques.
• Gifting to anyone except your spouse/civil partner (treated as disposal at market value).
• Swapping one asset for another (e.g. BTC → ETH, art for shares).
• Receiving compensation for damaged or lost assets.
• Emigrating while holding certain assets (deemed disposal rules for some).

Not a CGT disposal:

• Selling your main home (Private Residence Relief covers it).
• Transfers to your spouse / civil partner (treated as no gain/no loss).
• Selling/transferring inside an ISA, pension or EIS wrapper.
• Premium Bonds prizes (separate tax-free regime).

Chargeable assets in scope

In scope (CGT applies):

• Shares outside ISAs (UK or foreign).
• Crypto (Bitcoin, Ethereum, NFTs).
• Second homes and buy-to-let property.
• Foreign property.
• Chattels (art, antiques, jewellery) over £6,000 per item.
• Business assets (sometimes with reliefs).

Out of scope:

• Your main home (within Private Residence Relief).
• Cars (private cars are exempt from CGT).
• Personal possessions under £6,000 per item.
• Gilts (UK government bonds).
• Lottery, Premium Bonds, betting winnings.
• ISA and pension holdings.

The £3,000 annual exemption

Each tax year you get £3,000 of gains tax-free. Use it or lose it — no carry-forward.

• Joint asset? Each owner has their own £3,000.
• Transferred to spouse first? They get their own £3,000. Combined £6,000 family exemption.
• Multiple disposals? Aggregate gains and losses; apply £3,000 to the net gain.

Worked example — Mark, £40,000 salary, sells £15,000 of non-ISA shares

Mark bought shares for £8,000 in 2020. Sold November 2025 for £15,000. Held outside an ISA.

• Proceeds: £15,000
• Cost: £8,000
• Gain: £7,000
• Annual exemption: −£3,000
• Taxable gain: £4,000

Mark earns £40,000 salary, so his basic-rate band has £10,270 of room (basic-rate band ends at £50,270). All £4,000 sits in the basic-rate band.

• CGT at 18% on £4,000 = £720

Reportable on Self Assessment for 2025/26, due by 31 January 2027.

Worked example — Lisa, £85,000 salary, sells crypto

Lisa bought £5,000 of Ethereum in 2022. Sold £12,000-worth in 2025/26. She also swapped £3,000 of Bitcoin for Solana mid-year (treated as disposal of BTC).

ETH sale:

• Proceeds: £12,000
• Cost (per pool average): £5,000
• Gain: £7,000

BTC → SOL swap:

• Treated as disposal of BTC.
• Proceeds: £3,000 (market value at time of swap).
• Cost (pool average for the BTC sold): £1,800.
• Gain: £1,200.

Total gains: £7,000 + £1,200 = £8,200 Less exemption: £3,000 Taxable gain: £5,200

Lisa earns £85,000, so all basic-rate band is used by salary. The entire £5,200 sits in the higher-rate band.

• CGT at 24% on £5,200 = £1,248

She also acquired SOL with a cost basis of £3,000 (the market value at the swap) — which becomes the basis for any future SOL disposal.

The pooling rule for shares and crypto

You can't pick which specific shares you "sold" — HMRC treats holdings of the same security as a pool with an averaged cost basis.

Example pool calculation:

Sarah buys:

• 100 shares of ABC at £5 each in 2020 = £500.
• 200 shares of ABC at £8 each in 2023 = £1,600.

Her pool: 300 shares total, cost £2,100, average £7/share.

She sells 150 shares in 2025 for £9 each = £1,350 proceeds.

• Cost of disposal: 150 × £7 (pool average) = £1,050.
• Gain: £1,350 - £1,050 = £300.

Pool after disposal: 150 shares remaining, cost £1,050 (still £7 average).

The same rule applies to crypto — you can't claim FIFO or LIFO at your choice.

The "bed and breakfast" rule

To prevent gaming the £3,000 exemption by selling and immediately re-buying:

• 30-day rule: any shares re-bought within 30 days of disposal are matched against the disposal first (not the pool).
• This neutralises the "wash sale" of crystallising a loss and buying back immediately.

Workarounds:

• Bed and ISA: sell outside ISA, buy back inside ISA — the buy-back is a different beneficial owner (you-as-ISA-holder vs you-personally), exempt from the 30-day rule.
• Bed and spouse: sell, spouse buys back. Different beneficial owner.
• Bed and SIPP: similar to bed and ISA.
• 30+ days wait: sell, wait, buy back.

Property disposals — 60-day reporting

For UK residential property disposals on or after 27 October 2021:

1. Disposal completes.
2. Within 60 days, you must:
   • Report the gain via gov.uk's "Report and pay your Capital Gains Tax on UK property" service.
   • Pay the CGT due as an interim payment.
3. Annual Self Assessment still required — declares the same disposal, reconciles the 60-day payment.

Late 60-day reporting incurs £100 immediate penalty, plus daily £10 penalties after 3 months, plus tax-geared penalties after 6 and 12 months. Same penalty structure as Self Assessment.

Non-UK residents reporting UK property disposals also use the same service.

Private Residence Relief — your main home

Selling your main home is generally CGT-free under Private Residence Relief (PRR). Conditions:

• It's been your only or main residence throughout your period of ownership.
• You haven't let any part of it out (except a single lodger under rent-a-room rules).
• The garden is under 0.5 hectares (larger gardens may need partial relief calculation).

Partial relief if:

• Multiple homes (you nominate one as main).
• Periods of letting (Letting Relief abolished for most after April 2020).
• Periods of absence (some allowable as "deemed occupation").
• Business use of part of the home (apportioned).

The final 9 months of ownership are always deemed occupation if it was ever your main home (this used to be 36 months).

Spousal transfers — a free planning lever

Transfers between spouses or civil partners are no gain / no loss for CGT. The recipient inherits the original cost base.

This lets a couple use both £3,000 annual exemptions by transferring half of an asset before sale.

Worked example — David, £15,000 gain on shares

David and his spouse hold shares jointly. They plan to sell with a £15,000 gain.

If David alone disposes:

• £3,000 exemption used.
• £12,000 taxable gain × his marginal CGT rate (24% as a higher-rate taxpayer).
• CGT: £2,880.

If they transfer half to David's spouse (basic-rate, has full £3,000 exemption available), then both sell:

• David: £7,500 gain - £3,000 exemption = £4,500 × 24% = £1,080.
• Spouse: £7,500 gain - £3,000 exemption = £4,500 × 18% = £810.
• Combined CGT: £1,890.

Saving from spousal split: £990. Worth the 30 minutes of paperwork.

Losses

If your disposals produce a loss rather than a gain, you can:

• Offset losses against gains in the same tax year (automatic, no claim needed).
• Carry forward unused losses indefinitely (must register them on a tax return within 4 years of the year of loss).
• Losses can't be carried back (except in death year).

To register a loss, declare it on Self Assessment for the year of disposal, even if you have no other gains. HMRC keeps the loss against your record.

Reliefs that reduce CGT

• Business Asset Disposal Relief (BADR): 14% rate (rising to 18% from April 2026) on the first £1m lifetime of qualifying business disposals.
• Investors' Relief: 14% rate on qualifying unlisted-company shareholdings. Lifetime cap reduced to £1m from April 2026 (was £10m).
• Gift Hold-Over Relief: defers CGT when gifting business assets.
• Roll-Over Relief: reinvesting business sale proceeds into new business assets defers CGT.
• Enterprise Investment Scheme (EIS): 30% income tax relief + CGT deferral on reinvestment.
• Seed EIS (SEIS): 50% income tax relief + 50% CGT exemption on reinvestment.

Most of these need specific conditions and professional advice.

How to declare on the return

Form SA108 (Capital Gains Summary):

1. Section 1: Listed shares and securities (UK + foreign).
2. Section 2: Unlisted shares.
3. Section 3: UK property and land.
4. Section 4: Other property, assets and gains (includes crypto here).
5. Section 5: Losses (current year and brought forward).
6. Section 6: Reliefs claimed.

For each disposal: date, proceeds (£), cost (£), gain or loss, relief claimed.

If you have many crypto disposals (common — hundreds per year), most filers use a crypto tax software (Koinly, Recap, CoinTracker) to produce a HMRC-format summary that goes into a single aggregated entry.

Common pitfalls

1. Forgetting crypto swaps as disposals. Every ETH→USDC swap is taxable.
2. Missing 60-day property reporting — biggest source of avoidable penalties.
3. Selling within an ISA wrapper but assuming it's outside. ISA disposals are completely outside CGT — no declaration needed.
4. Not pooling correctly — selling shares at different prices in the same security.
5. Wash sale trap (30-day rule) — re-buying within 30 days breaks the loss crystallisation.
6. Forgetting losses — register them even when there's no tax saving in the year, for future use.

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Coming next

• Part 6: Payments on account explained
• Part 7: Making Tax Digital — what's changing
• Part 8: After you file — refunds, amendments, audits

Sources

• HMRC: Capital Gains Tax
• HMRC: Capital Gains Tax: what you pay it on, rates and allowances
• HMRC: Report and pay your Capital Gains Tax on UK property
• HMRC: Cryptoassets Manual
• HMRC: Tax when you sell shares