Calculate Capital Gains Tax: How to Work Out CGT on Assets in 2026/27

Knowing how to calculate Capital Gains Tax is important when selling assets that have increased in value. Whether you are disposing of property, shares, investments, land or business assets, understanding the calculation process helps you estimate your potential tax liability and plan effectively before completing a transaction.

Capital Gains Tax (CGT) is charged on the profit made from disposing of an asset rather than the total sale proceeds. The taxable gain is calculated after deducting the original purchase cost, qualifying expenses, available losses and applicable exemptions. The final rate applied also depends on your wider Income Tax position, explained fully in our ultimate guide to personal tax in the UK.

For the 2026/27 tax year, individuals benefit from a £3,000 Annual Exempt Amount. This means the first £3,000 of total taxable gains in a tax year may be free from CGT if the allowance has not already been used.

This guide explains how to calculate capital gains, the steps involved in a Capital Gains Tax calculation, which costs can reduce your gain and how CGT applies to different types of assets.

What Is Capital Gains Tax?

Capital Gains Tax is a tax charged when you sell or dispose of an asset that has increased in value since you acquired it.

A disposal can include:

• Selling an asset.
• Giving an asset away in certain circumstances.
• Transferring an asset where market value rules apply.
• Exchanging one asset for another.

CGT may apply to various assets, including:

• Buy-to-let properties and second homes.
• Shares and investment funds held outside an ISA.
• Business assets.
• Land.
• Valuable personal possessions.

Your main home is normally exempt through Private Residence Relief, although this depends on your circumstances and whether the property qualifies fully for relief.

How to Calculate Capital Gains Tax

The basic process to calculate capital gain involves working out the profit made on disposal and then applying the relevant tax rules.

The general calculation is:

Sale proceeds – purchase cost – allowable expenses = capital gain

Once the gain has been calculated, you then consider:

• Available capital losses.
• The Annual Exempt Amount.
• Applicable CGT rates.
• Any available reliefs.

The final taxable amount is the figure used to calculate the CGT liability.

Capital Gains Tax Calculation Step by Step

Step 1: Calculate the Gain on Each Asset

The first step is to calculate the gain or loss for each asset sold during the tax year.

For each disposal, you normally need:

• The disposal value.
• The original purchase cost.
• Qualifying acquisition costs.
• Qualifying improvement costs.
• Disposal expenses.

For example, if an investor purchased shares for £20,000 and later sold them for £35,000, the initial gain before deductions would be £15,000.

Step 2: Add Your Capital Gains Together

After calculating each individual gain or loss, all gains for the tax year are combined.

For example:

• Property gain: £40,000.
• Share gain: £10,000.
• Investment loss: £5,000.

The combined taxable position would need to take the loss into account before applying exemptions and rates.

Step 3: Deduct Allowable Capital Losses

Capital losses can reduce taxable gains.

Losses may arise when an asset is sold for less than its original cost. These losses can usually be used against gains in the same tax year or carried forward where appropriate.

Keeping records of losses is important because they may reduce future Capital Gains Tax liabilities.

Step 4: Apply the Capital Gains Tax Allowance

The Annual Exempt Amount reduces the amount of gain subject to CGT.

For 2026/27:

• Individuals have a £3,000 allowance.
• Most trustees have a £1,500 allowance.

The allowance applies to total gains during the tax year and cannot be carried forward if unused.

Capital Gains Tax Rates for 2026/27

The final stage of a Capital Gains Tax calculation is applying the correct CGT rate. Our full reference guide to current rates and allowances sets these out alongside the annual exemption in more detail.

The rate depends on your taxable income because capital gains are added on top of your income when determining whether you remain within the basic-rate band.

Capital Gains Tax on Assets

Capital Gains Tax on assets depends on the type of asset sold and the specific rules that apply.

Property

CGT commonly applies to:

• Buy-to-let properties.
• Holiday homes.
• Inherited properties.
• Land held as an investment.

Allowable deductions may include:

• Original purchase price.
• Stamp Duty Land Tax.
• Legal fees.
• Estate agent fees.
• Qualifying capital improvements.

Shares and Investments

Investors may need to calculate CGT when selling shares or funds held outside tax-efficient accounts.

The calculation generally compares the purchase cost against the disposal proceeds after considering allowable transaction costs and available losses.

Allowable Costs That Reduce Your Gain

Understanding allowable costs is an important part of knowing how to calculate capital gains.

Costs that may reduce your taxable gain include:

• Purchase legal fees.
• Sale legal fees.
• Estate agent fees.
• Stamp Duty Land Tax.
• Professional valuation costs.
• Qualifying capital improvement expenditure.

Routine repairs and maintenance costs are generally not deducted from the capital gain because they are normally dealt with under separate income tax rules.

Capital Gains Tax Reliefs and Exemptions

Several Capital Gains Tax reliefs may reduce or remove a CGT liability.

Common reliefs include:

• Private Residence Relief: May exempt gains from selling your main home.
• Business Asset Disposal Relief: May reduce CGT on qualifying business disposals.
• Gift Relief: May defer CGT on certain qualifying gifts.
• Capital losses: Can reduce taxable gains.

Reporting and Paying Capital Gains Tax

Reporting requirements depend on the type of asset sold.

If you sell a UK residential property and CGT is payable, you normally need to report and pay the tax within 60 days of completion.

Other taxable gains are generally reported through Self Assessment where required.

Keeping complete records of purchases, improvements, sales and supporting documents is essential to support your calculation.

Common CGT Calculation Mistakes

Common errors include:

• Using outdated CGT rates.
• Forgetting the £3,000 Annual Exempt Amount.
• Failing to include allowable costs.
• Confusing repairs with improvements.
• Ignoring available capital losses.
• Missing property reporting deadlines.

Example: Capital Gains Tax Calculation

David sells an investment property for £400,000.

His original purchase price was £250,000 and he has qualifying costs of £35,000.

The calculation is:

• Sale proceeds: £400,000.
• Less purchase price and allowable costs: £285,000.
• Capital gain: £115,000.
• Less Annual Exempt Amount: £3,000.
• Taxable gain: £112,000.

The final CGT liability depends on David’s income position and the applicable CGT rate.

When to Seek Advice

Professional advice may be useful where:

• You are selling property.
• You have multiple assets being disposed of.
• You need to identify available reliefs.
• You are transferring assets between individuals.
• You are completing a complex Self Assessment return.

Key Takeaways

Knowing how to calculate Capital Gains Tax helps individuals understand potential liabilities before selling assets.

A correct Capital Gains Tax calculation requires careful consideration of purchase costs, allowable expenses, losses, exemptions and current CGT rates.

Whether disposing of property, shares or other investments, understanding the rules around Capital Gains Tax on assets allows taxpayers to plan effectively and remain compliant with HMRC requirements.

Case Study: Calculating Potential CGT Before Selling Investments

James visited our Wimbledon office after deciding to sell a combination of investment assets and wanted to understand how to calculate Capital Gains Tax before completing the transactions. He was unsure which costs could reduce his taxable gain, how the Annual Exempt Amount applied and what CGT rate would apply based on his income position.

During the consultation, we reviewed James’s purchase records, disposal values and associated costs to prepare an accurate Capital Gains Tax calculation. We explained how to calculate capital gains by deducting the original acquisition cost, qualifying expenses and available losses from the disposal proceeds. We also reviewed the 2026/27 CGT rules, including the £3,000 Annual Exempt Amount, the current CGT rates for different assets and the importance of considering his Income Tax position when determining the final liability. We advised him on maintaining records of purchase costs, improvement expenditure and disposal expenses to support his calculation if HMRC requested evidence.

Following the review, James gained a clearer understanding of his potential Capital Gains Tax on assets, identified the deductions available to reduce his taxable gain and was able to plan his disposals more effectively while ensuring his tax position remained accurate and compliant with HMRC requirements.