When you sell an asset and make a profit, you might be liable to pay Capital Gains Tax (CGT). Whether you’re a sole trader, CIS worker, or self-employed professional, understanding how CGT works can help you plan better and avoid unexpected tax bills.
This guide provides a clear and simple Capital Gains Tax overview, including how it’s calculated, what assets it applies to, and how to reduce your bill legally.
What is capital gains tax?
Capital Gains Tax is a tax you pay when you sell or ‘dispose of’ an asset that has increased in value. You’re taxed on the gain, not the total sale price.
Example: If you bought a second property for £150,000 and sold it for £200,000, your capital gain is £50,000.
When do you pay capital gains tax?
You may need to pay CGT if you sell or give away:
- Personal possessions worth over £6,000 (excluding your car)
- Property that is not your main home
- Shares (not in an ISA or pension)
- Business assets
If you’re self-employed and sell equipment or property from your business, CGT may apply.
Capital gains tax rates for 2025
CGT rates depend on the type of asset and your income tax band:
| Asset Type | Basic Rate Taxpayer | Higher/Additional Rate |
|---|---|---|
| Shares | 10% | 20% |
| Property | 18% | 24% |
| Business Assets | 10% (with reliefs) | 20% |
The Annual Exempt Amount for individuals in 2025/26 is £3,000. You only pay CGT on gains above this threshold.
How to calculate your capital gain
Use this simple formula:
Sale Price – Original Purchase Price – Allowable Costs – Tax-Free Allowance = Taxable Gain
Allowable costs can include:
- Fees for estate agents or solicitors
- Stamp Duty when you bought the asset
- Improvement costs (not maintenance)
Reporting and paying capital gains tax
You must report CGT if you’ve made gains above the tax-free allowance. You can do this:
- Via your Self Assessment tax return
- Or using the ‘real-time’ Capital Gains Tax service on HMRC’s website
For property sold after April 2020, you must report and pay CGT within 60 days of the sale.
Ways to reduce your capital gains tax bill
Here are some smart (and legal!) ways to reduce your CGT:
- Use your annual exemption – If you’re close to the limit, consider spreading disposals over different tax years.
- Transfer assets to a spouse – Transfers between spouses are tax-free.
- Claim reliefs – Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) may reduce your tax to 10%.
- Offset losses – Report any capital losses to reduce future gains.
- Invest in tax-free vehicles – Like ISAs or pensions.
Special notes for sole traders and CIS workers
If you run your own business or work under the Construction Industry Scheme (CIS), you may hold tools, machinery, vehicles, or property that can trigger CGT when sold. If you’re disposing of business assets, always:
- Keep accurate records of purchase and sale
- Track any associated costs
- Check if Business Asset Disposal Relief applies
Let Tax2u help you get it right
Capital Gains Tax doesn’t need to be confusing. At Tax2u, we help self-employed professionals, CIS workers, and small business owners:
- Accurately report gains
- Minimise tax through reliefs
- Avoid penalties for late submissions
Get help with your capital gains tax – Talk to a real tax expert today and keep more of your profit.