Capital Gains Tax Explained

The annual exempt amount, the now unified rates across shares and property and how the split actually works

If you sell shares held outside an ISA, for example from a workplace share scheme or general investing, for more than they cost you, the profit is a capital gain, taxed separately from your salary and from Dividend Tax on any income the shares paid along the way. This page covers the general principles; it doesn't go into shared ownership, business asset reliefs, or non-resident rules, which are out of scope for a PAYE-employee audience.

The annual exempt amount

Every individual gets £3,000 of gains tax-free each year, before any Capital Gains Tax is due at all. Unlike the Dividend Tax allowance, this comes straight off your total gain first. It doesn't interact with your Income Tax bands the way the dividend allowance does.

The rates: now the same across asset types

Once the exempt amount is used up, the rate is 18% or 24%, depending on how much of your remaining basic-rate Income Tax band the gain fits into. Prior to 30 October 2024, shares and most other assets were actually taxed at a lower rate (10%/20%) than residential property (18%/24%). That distinction was removed at the October 2024 Budget; every individual gain is now taxed the same way, whatever the asset.

Shares held inside an ISA are exempt from Capital Gains Tax entirely, the same as they are from Dividend Tax. Selling your own home is usually exempt too, under Private Residence Relief. This page focuses on shares and general assets, rather than property.

How the 18%/24% split actually works

The information to hold onto: your gain doesn't get its own separate band. It stacks on top of your other taxable income, and only the slice that still fits within your basic-rate band is taxed at the lower rate, everything above that, at 24%.

If you're a sole trader or run a business

A separate relief called Business Asset Disposal Relief, lets qualifying sole traders, partnerships, and trustees pay 18% on qualifying business disposals, subject to its own lifetime limit. That's a different scenario from selling personal shareholdings and outside the scope of this page. If it might apply to you, it's worth checking gov.uk's own guidance directly.

This page explains general Capital Gains Tax rules and is not personalised advice; see the disclaimer. It doesn't cover property disposals, business asset reliefs in detail, shared ownership, or non-resident rules. See also Dividend Tax for tax on income the shares pay before you sell them, and Income Tax Explained for how the underlying bands work.