How capital gains are linked with Income Tax

How capital gains are linked with Income Tax is important to understand as your overall income position affects the Capital Gains Tax (CGT) rate you pay.

CGT interacts directly with your Income Tax band. Your taxable income is first calculated after deducting your Personal Allowance and any Income Tax reliefs. Your chargeable capital gains are then added on top, after subtracting the annual tax-free CGT allowance (2026-27: £3,000). This determines whether your gains fall within the basic or higher rate Income Tax band, which determines the CGT rate that applies.

For individuals in the higher or additional rate Income Tax band, capital gains are usually taxed at 24% from 6 April 2026. Basic rate taxpayers will initially pay CGT at a rate of 18% but this increases to 24% for any amount of chargeable gain above the basic Income Tax band.

Gains on certain assets are treated differently. Gains on business assets may qualify for Business Asset Disposal Relief at a rate of 18% and most people do not pay CGT when selling their main home. Trustees and personal representatives typically pay a flat 24% CGT rate.

Source:HM Revenue & Customs | 04-05-2026
author avatar
Aitch
I'm Aitch, the Founder and CEO of CIGMA Accounting Ltd. As a Chartered Management Accountant and as a CIMA member, I've spent more than 16 years helping businesses, entrepreneurs, landlords, and individuals with tax planning, accounting, and HMRC compliance. As a chartered accountant in London, I'm passionate about making complex tax matters easier to understand and helping clients make confident financial decisions. Over the years, I've advised start-ups, SMEs, established companies, and high-net-worth individuals across a wide range of tax and accounting matters. My expertise includes Corporation Tax, Self-Assessment, Capital Gains Tax, Inheritance Tax planning, R&D tax relief, capital allowances, international tax, and resolving complex HMRC compliance issues. Whether clients need a business accountant, tax accountant, or strategic tax advisor, my focus is always on delivering practical advice that creates long-term value. One of my specialist areas is Making Tax Digital (MTD). I've worked extensively with businesses preparing HMRC's digital reporting requirements, helping them move to cloud accounting, improve financial processes, and adopt technology that makes compliance more efficient. I regularly speak at Making Tax Digital roadshows, industry events, and educational sessions in collaboration with Zoho Books, sharing practical insights into digital accounting, tax legislation, and the future of the profession. Many business owners looking for the best accounting firm in London are not simply searching for an accountant they're looking for trusted advice, responsive support, and long-term value. That's the approach I've taken in building CIGMA Accounting. My team and I work closely with businesses across London and the UK, providing accounting services, tax advisory, bookkeeping, payroll, VAT, company accounts, and strategic tax planning tailored to each client's goals. Through this website, I share practical guidance on UK taxation, Making Tax Digital, HMRC updates, Corporation Tax, Self-Assessment, and business finance. My aim is to provide reliable, straightforward information that helps business owners understand changing regulations, reduce compliance risks, and make informed financial decisions with confidence.