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Capital Gains Tax (CGT) Explained: Everything You Need to Know in 2025

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Capital Gains Tax (CGT) Explained: Everything You Need to Know in 2025

Capital Gains Tax (CGT) is a critical aspect of tax planning for individuals, investors, and business owners in the UK. It applies to the profit made when you sell or dispose of certain assets. Understanding CGT rules, rates, allowances, and exemptions can help you minimize your tax liabilities and plan effectively. This guide explains CGT in detail for both UK residents and non-residents, covering property, investments, shares, cryptocurrencies, and more.

What is Capital Gains Tax (CGT)?

Capital Gains Tax is the tax you pay on the profit made when you sell or dispose of an asset that has increased in value. The tax is calculated on the gain, not the total amount of money received. Common assets subject to CGT include:

  • Property (other than your main residence).

  • Shares and other investments.

  • Cryptocurrencies.

  • Valuable personal possessions worth over £6,000 (e.g., antiques, jewellery).

CGT Rates in 2025

CGT rates depend on your income tax band and the type of asset:

  • Basic Rate Taxpayers: 10% (18% for residential property).

  • Higher/Additional Rate Taxpayers: 20% (28% for residential property).

Illustration:

  • Taxable Gain on Shares: £50,000.

  • If Basic Rate Taxpayer: Tax is £5,000 (£50,000 x 10%).

  • If Higher Rate Taxpayer: Tax is £10,000 (£50,000 x 20%).

CGT Allowances

Every individual is entitled to an Annual Exempt Amount (AEA), which is the portion of gains that can be realized tax-free:

  • Annual Exemption in 2025: £6,000 (reduced from previous years).

  • Unused allowances cannot be carried forward to future tax years.

Illustration:

  • Taxable Gain: £15,000.

  • Annual Exemption: £6,000.

  • Taxable Amount: £9,000 (£15,000 - £6,000).

Reliefs and Exemptions

1. Principal Private Residence Relief (PPR):

  • Exempts the gain on the sale of your main home.

  • Partial relief may apply if you rented out part of the property.

2. Business Asset Disposal Relief (BADR):

  • Reduces the CGT rate to 10% on qualifying business assets.

  • Lifetime limit of £1 million in gains.

3. Investors' Relief:

  • Reduces the rate to 10% on certain qualifying investments.

  • Lifetime limit of £10 million in gains.

4. Transfers Between Spouses and Civil Partners:

  • No CGT is payable on transfers between spouses or civil partners if they are living together.

Illustration:

  • Value of Asset Transferred: £200,000.

  • CGT Liability: None (for transfers between spouses).

CGT on Listed and Non-Listed Shares

1. Listed Shares:

  • CGT applies to the profit made on buying and selling listed shares.

  • Dividends are taxed separately under income tax.

2. Non-Listed Shares:

  • Similar rules apply, but valuation may require additional evidence.

  • Potentially eligible for Business Asset Disposal Relief (10% rate).

3. Right Shares and Bonus Shares:

  • CGT is calculated based on the cost of the original shares and apportioned value for rights/bonus shares.

Illustration:

  • Original Shares Cost: £10,000.

  • Bonus Shares Value: £2,000.

  • Sale Value: £15,000.

  • Taxable Gain: £3,000 (£15,000 - £12,000).

CGT on Cryptocurrency

Cryptocurrencies, such as Bitcoin, are treated as assets for CGT purposes. Tax applies to gains when:

  • Selling or gifting cryptocurrency.

  • Exchanging cryptocurrency for another token.

  • Using cryptocurrency to pay for goods or services.

Illustration:

  • Purchased Bitcoin for: £5,000.

  • Sold for: £12,000.

  • Taxable Gain: £7,000 (£12,000 - £5,000).

CGT and Asset Transfers Between Spouses

No CGT is due on transfers between spouses or civil partners, provided they are living together. This rule enables tax-efficient planning by transferring assets to the partner with unused allowances or a lower tax rate.

Illustration:

  • Asset Value: £100,000.

  • Transferred to Spouse: No CGT payable.

CGT for Non-Residents

Non-residents are subject to CGT on:

  • UK residential property.

  • Disposals of UK land or indirect interests (e.g., shares in property-holding companies).

Deemed Domicile: Individuals deemed UK domiciled may face additional CGT obligations on worldwide assets.

Double Taxation Relief: Tax treaties may help avoid double taxation for non-residents.

Temporary Non-Residence Rule: Gains made during temporary absence (less than five years) may still be subject to UK CGT.

Illustration:

  • UK Property Sale by Non-Resident: Taxable under CGT rules.

  • Property Value: £500,000.

  • Gain: £100,000.

  • Tax Rate: 18% (basic) or 28% (higher).

CGT on Partnerships

When disposing of a share in a partnership, CGT applies to the proportion of assets you are entitled to:

  • Reliefs like BADR may apply if the partnership qualifies as a business asset.

Illustration:

  • Partnership Share Value: £200,000.

  • Taxable Gain: £50,000.

  • CGT Rate: 10% (if BADR applies).

Why Choose Acumen Accountants and Tax Advisers?

At Acumen Accountants and Tax Advisers, we provide tailored advice to help you:

  • Navigate complex CGT rules for property, shares, and other assets.

  • Optimize your tax planning for listed and non-listed investments.

  • Minimize liabilities for UK residents and non-residents.

  • Ensure compliance with HMRC regulations while maximizing tax reliefs.

Contact Us Today:
📞 07534473220
🌐 www.acumenagc.com
✉ info@acumenagc.com
🏢 37th Floor, 1 Canada Square, London E14 5DY
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Final Thoughts

Understanding and managing Capital Gains Tax is essential for preserving your wealth. By knowing the rules, allowances, and reliefs, you can reduce your tax liability and make informed financial decisions. Whether you’re dealing with property, shares, cryptocurrencies, or other assets, professional advice from Acumen Accountants and Tax Advisers ensures you stay compliant and save money. Start planning your CGT strategy for 2025 today!