UK Tax Year 2026/27: Capital Gains Tax and Dividends

Capital Gains Tax Overview 2026/27

CGT is charged on gains when you dispose of an asset — sell, gift, or transfer it. Key features:

• Charged only on the gain (proceeds minus allowable costs), not the full proceeds
• Annual exempt amount: £3,000
• Gains from ISAs: always exempt
• Gains on main home: usually exempt via Private Residence Relief
• Losses in the same year reduce gains; unused losses carried forward indefinitely

CGT Rate Summary 2026/27

The equalisation of residential and other property CGT rates in October 2024 was significant — previously residential property was 18%/28%, while other assets were 10%/20%. Both categories are now 18%/24%.

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CGT Computation 2026/27

Basic CGT calculation steps

1. Calculate gain on each asset: disposal proceeds − purchase cost − allowable expenses
2. Offset any capital losses from the same year
3. Deduct annual exempt amount (£3,000)
4. Add remaining gain to income to determine tax rate
5. Apply 18% or 24% (or 18% for BADR assets)

Determining your CGT rate

Your CGT rate depends on whether the gain, when added to your income, falls within or above the basic-rate band:

• Basic-rate band upper limit: £50,270 (income + gains combined)
• If your income is £35,000 and you have a £20,000 gain: the £15,270 within the band is taxed at 18%, the remaining £4,730 at 24%

Worked example

Tom has £40,000 salary. He sells shares at a £16,000 gain:

• Annual exempt: −£3,000
• Taxable gain: £13,000
• Basic-rate band remaining: £50,270 − £40,000 = £10,270
• First £10,270 of gain at 18% = £1,849
• Remaining £2,730 at 24% = £655
• Total CGT: £2,504

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BADR — Business Asset Disposal Relief 2026/27

BADR reduces the CGT rate on qualifying business disposals to 18% (regardless of whether you're a higher-rate taxpayer). The lifetime limit of gains eligible is £1,000,000.

Rate history

The October 2024 Budget raised BADR rates in two steps. At 18%, BADR now offers only a marginal saving over the standard higher-rate CGT rate of 24% — a 6 percentage point difference, compared to the 14pp difference that existed before 2024.

BADR qualifying conditions

• Sole trader or partner selling all or part of a business (continuous trading for 2+ years)
• Shareholder in a qualifying trading company:
  • Own 5%+ of ordinary shares
  • Officer or employee for 2+ years
  • Company must be a trading company (not investment company)

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Investor's Relief 2026/27

Investor's Relief applies to non-employee investors in unquoted trading companies — effectively an extension of BADR for external investors:

• Rate: 18% in 2026/27 (raised from 10% in October 2024)
• Lifetime limit: £10,000,000
• Must hold shares for at least 3 years

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Capital Losses and Planning

Using losses strategically

Capital losses must first be set against gains in the same tax year — you cannot choose to carry them forward instead of using them in-year. However, if losses reduce the gain below the £3,000 exempt amount, the unused exempt amount is lost (you cannot carry it forward).

A loss of £15,000 and gains of £16,000:

• Net gain: £1,000 — below the £3,000 exempt amount
• Tax due: £0
• Wasted relief: £2,000 of annual exempt amount was "used" by having it available but not needed

Bed and ISA

A classic CGT strategy: sell appreciated shares held outside an ISA, crystallise the gain (using your annual exempt amount), and immediately repurchase inside an ISA wrapper. Future gains and income are then sheltered.

With only £3,000 exempt amount per year, full Bed-and-ISA is limited — but it remains useful for assets with modest gains.

Loss harvesting before 5 April 2027

If you hold assets at a loss at the end of the tax year, consider selling before 5 April to crystallise the loss. Repurchase after 30 days (to avoid bed-and-breakfasting rules) or repurchase inside an ISA immediately. The loss carries forward to reduce future gains.

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Dividend Tax 2026/27

Dividends are taxed differently from earned income — they have their own allowance and rate schedule.

Dividend allowance and rates

Dividends sit on top of income for rate purposes — salary and other income fills the bands first, then dividends are taxed in the remaining space.

Worked example: director taking dividends

Helen draws a £12,570 salary (zero income tax, zero NI as below Primary Threshold) and £40,000 in dividends from her company:

• Total income: £52,570
• Income tax on salary: £0 (covered by PA)
• Dividends:
  • First £500: 0% = £0
  • Remaining £39,500: fills basic-rate band up to £50,270 (she's already used £12,570 of it in salary)
  • Remaining basic-rate capacity: £50,270 − £12,570 = £37,700
  • Dividends in basic rate: £37,700 × 8.75% = £3,299
  • Dividends in higher rate: (£40,000 − £500 − £37,700) × 33.75% = £1,800 × 33.75% = £608
• Total tax on £40,000 dividends: £3,907

Compare this to taking the same £40,000 as salary: income tax ~£13,432 + employee NI ~£3,911 = £17,343. The dividend route saves approximately £13,436 — though from post-corporation-tax profits.

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The Interaction: CGT, Dividends and the £3,000 Exempt Amount

Both capital gains and dividend income are taxed in the same year-end calculations but interact with income differently:

• Capital gains use the annual exempt amount and are then added to income to determine the rate band
• Dividend income uses the dividend allowance and is stacked on top of income after savings income

If you have both dividends and capital gains in 2026/27, it's worth modelling whether realising gains or receiving dividends more tax-efficiently. ISA contributions should shelter whichever has the higher marginal rate first.

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CGT Reporting 2026/27

When to report

• Self Assessment: all CGT (except property disposals, which need 60-day online reporting) is declared in the Self Assessment return (SA100 with SA108 supplement)
• HMRC Real Time CGT Service: for non-SA taxpayers who have only capital gains to report in a year
• 60-day rule: residential property disposals must be reported and estimated tax paid within 60 days of completion (see Part 4 of this series)

Penalties for late CGT reporting

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