How to Calculate Capital Gains Tax on Investments

What Is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax on the profit you make when you sell (or "dispose of") an asset that has increased in value. You pay CGT on the gain — the difference between what you paid and what you received — not on the total sale amount.

CGT applies to shares, cryptocurrency, investment property, and other assets. It does not apply to assets held inside ISAs or SIPPs, your main home (in most cases), or gains below the annual exempt amount.

For a broader overview of UK CGT rules, see our complete guide to UK capital gains tax rates, rules, and strategies.

How CGT Is Calculated (Step by Step)

Here is the process HMRC uses to calculate your capital gains tax liability:

Calculate the gain on each disposal. Take the sale proceeds and subtract the original purchase cost, plus any allowable costs (broker fees, stamp duty, improvement costs for property).
Offset any capital losses. If you sold other assets at a loss in the same tax year, subtract those losses from your total gains.
Deduct the Annual Exempt Amount (AEA). For 2025/26, this is £3,000 per person. Only the gain above this threshold is taxable.
Apply the correct CGT rate. The rate depends on your total taxable income and the type of asset (see rates below).

Formula: Tax = (Total Gains − Losses − £3,000 AEA) × CGT Rate

Worked Example: Selling Shares

You bought 500 shares at £10 each (cost: £5,000) and paid £50 in broker fees. You sell them for £8,000 with a £50 selling fee.

Disposal proceeds: £8,000
Allowable costs: £5,000 + £50 + £50 = £5,100
Gain: £8,000 − £5,100 = £2,900
Annual Exempt Amount: £3,000
Taxable gain: £2,900 − £3,000 = £0 (below the AEA — no tax owed)

If the gain had been £6,000 instead:

Taxable gain: £6,000 − £3,000 = £3,000
Basic rate taxpayer: £3,000 × 10% = £300 tax
Higher rate taxpayer: £3,000 × 20% = £600 tax

Worked Example: Selling Crypto

Cryptocurrency uses "pooled cost basis" — the average cost of all tokens you hold, not the price of specific tokens.

You bought 2 BTC at £20,000 each and 1 BTC at £30,000 (total: £70,000 for 3 BTC)
Pooled cost per BTC: £70,000 ÷ 3 = £23,333
You sell 1 BTC for £35,000
Gain: £35,000 − £23,333 = £11,667
After AEA: £11,667 − £3,000 = £8,667 taxable
Basic rate: £8,667 × 10% = £867 tax

Note: the same-day rule and 30-day bed-and-breakfasting rule override pooled cost in specific situations. See HMRC's crypto guidance for details.

CGT Rates for 2025/26

Rates depend on your total taxable income (salary + gains combined) and the asset type:

Tax Band	Shares, Crypto & Other Assets	Residential Property
Basic rate (income up to £50,270)	10%	18%
Higher rate (income above £50,270)	20%	24%

If your gains push you from basic into higher rate, you pay 10% on the portion within basic rate and 20% on the rest.

The Annual Exempt Amount for 2025/26 is £3,000 (reduced from £6,000 in 2023/24 and £12,300 in 2022/23).

Scotland: Is CGT Different?

Capital Gains Tax is reserved to the UK Parliament — it is not devolved to Scotland. Scottish residents pay the same CGT rates as the rest of the UK (10%/20% for most assets, 18%/24% for residential property).

However, Scotland has different income tax bands. This matters because your income tax band determines which CGT rate applies. A Scottish taxpayer's "basic rate" threshold differs from the rest of the UK, which can affect whether gains fall into the 10% or 20% bracket. Check your Scottish tax band before calculating.

Common Ways to Reduce Your CGT Bill

Use your annual exempt amount. Sell enough each year to realise up to £3,000 in gains tax-free.
Hold assets in an ISA or SIPP. Gains inside these wrappers are completely tax-free.
Bed and ISA. Sell assets and immediately rebuy within an ISA to reset the cost basis to current market value.
Transfer to your spouse. Transfers between spouses are tax-free, and your spouse has their own £3,000 AEA.
Offset losses. Crystallise losses in the same tax year to reduce your net gain.
Hold for longer. There is no CGT time-based reduction in the UK, but holding avoids short-term trading costs and lets you choose the tax year.

Calculate It Instantly

Use our free Capital Gains Tax Calculator to estimate your liability in seconds. Enter your purchase cost, sale proceeds, and income — it handles the AEA, rates, and band calculations automatically.

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