What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on profits when you sell investments, property (not main home), or other assets. If you buy shares for £10,000 and sell for £15,000, your capital gain is £5,000. You pay CGT on gains above your annual allowance.
CGT Example
Bought Apple shares: £10,000
Sold Apple shares: £18,000
Gain: £8,000
Annual CGT allowance: -£3,000
Taxable gain: £5,000
CGT at 20% (higher rate): £1,000
Net profit after tax: £7,000
CGT Rates (2024/25)
Basic Rate Taxpayer
10%
If your total income + capital gains keep you in the basic rate band (up to £50,270)
Higher/Additional Rate
20%
If your income exceeds £50,270 or your gains push you into higher rate band
Property CGT Rates are Different
CGT on property (except main home) is 18% (basic) / 24% (higher). This guide focuses on investments (shares, crypto, etc.) which are 10%/20%.
Annual CGT Allowance
2024/25: Allowance Slashed to £3,000
The CGT allowance has been drastically reduced. It was £12,300 in 2022/23, £6,000 in 2023/24, and now just £3,000 for 2024/25. Use it wisely!
| Tax Year | Allowance |
|---|---|
| 2022/23 | £12,300 |
| 2023/24 | £6,000 |
| 2024/25 | £3,000 |
How the Allowance Works
- Per person, per tax year - Each individual gets £3,000
- Use it or lose it - Cannot carry forward unused allowance
- All assets combined - Shares, crypto, property (excl. main home)
- Losses offset gains - Can deduct capital losses from gains
Example: Using Your Allowance
Gain from selling AAPL: £5,000
Loss from selling TSLA: -£1,000
Net gain: £4,000
Annual allowance: -£3,000
Taxable gain: £1,000
CGT at 20%: £200
Tax Year: 6th April to 5th April
The UK tax year runs from 6th April to 5th April (not calendar year). Your £3,000 allowance resets on 6th April each year.
How to Calculate CGT
Step-by-Step Calculation
Calculate Disposal Proceeds
Total amount received from selling the asset (sale price)
Subtract Allowable Costs
Purchase price + transaction fees + improvement costs (for property)
Result = Capital Gain (or Loss)
If positive, it's a gain. If negative, it's a loss (can offset future gains)
Sum All Gains and Losses
Combine all disposals for the tax year to get net gain/loss
Deduct Annual Allowance
Subtract £3,000 from your net gains
Apply CGT Rate
10% (basic rate) or 20% (higher rate) on remaining taxable gain
Detailed Example
Transaction 1: Microsoft
Bought: £5,000 (+ £10 fee)
Sold: £8,000 (- £10 fee)
Gain: £2,980
Transaction 2: Tesla
Bought: £3,000
Sold: £2,000
Loss: -£1,000
Transaction 3: Nvidia
Bought: £4,000
Sold: £9,500
Gain: £5,500
Total gains: £8,480
Total losses: -£1,000
Net gain: £7,480
Annual allowance: -£3,000
Taxable gain: £4,480
CGT at 20%: £896
Share Identification Rules
If you buy shares in the same company at different times and prices, HMRC has rules for which shares you are selling (to calculate the gain). This is called "Share Matching".
1. Same Day Rule
Shares sold are matched with shares bought on the same day first.
2. 30-Day Rule (Bed and Breakfasting)
If you buy the same shares within 30 days after selling, those shares are matched. This prevents you from selling to crystallise loss then immediately rebuying.
3. Section 104 Pool (Average Cost)
All other shares are pooled together and you use the average cost basis.
You've read 30% of this guide
Unlock 7 More Expert Sections
The most actionable parts are just ahead — halal fund picks, tax strategies, and expert tips Muslim investors use to build real wealth.
⚡ Most members recoup the cost in the first month through tax savings alone.