When you sell an asset that's increased in value, you might face a tax bill that catches you off guard. Capital gains tax applies to the profit you make, not the total sale price, and understanding how it works can help you plan your financial decisions more effectively.
Capital gains tax charges you on the gain itself rather than what you receive. If you bought shares for £10,000 and sold them for £30,000, you'd pay tax on the £20,000 profit. The rates you pay depend on your income level and what type of asset you're selling.
Current rates and allowances
From April 2025, basic rate taxpayers pay 18% on most assets, while higher and additional rate taxpayers pay 24%. Your main residence typically escapes this tax entirely, but second homes and investment properties are subject to these charges when you sell.
You get an annual tax-free allowance of £3,000 for the 2025/26 tax year. This means you only pay capital gains tax on profits above this threshold. According to the House of Commons Library, in 2022/23, just 348,000 people paid capital gains tax compared to 34.6 million income tax payers, showing how concentrated this tax remains among those with significant asset disposals.
What triggers a tax bill?
Selling shares, business assets, valuable possessions worth more than £6,000, or investment properties all create potential capital gains tax liabilities. You'll need to report and pay this tax on your annual tax return, with residential property sales requiring notification to HM Revenue & Customs within 60 days of completion.
The timing of your sale can still affect your tax position. Spreading sales across different tax years allows you to use your annual £3,000 allowance multiple times, while selling everything in one go might push you into higher tax bands unnecessarily.
How your investments interact with tax planning
While capital gains tax doesn't directly affect your mortgage, it becomes relevant when you're building wealth through property investments. When you eventually sell a buy-to-let property or second home, you'll face capital gains tax on any profit you've made, which can significantly impact your returns.
Working with Moneysprite means you can develop a comprehensive approach that considers both your immediate property goals and longer-term tax efficiency. Rather than making isolated decisions about investments or property purchases, you can see how each choice affects your overall position.
The experienced advisers at Moneysprite can help you create a clear plan that aligns your lifestyle goals with your financial resources. Based in London and serving clients across the South of England, we understand how capital gains tax fits into your broader financial picture.
Get in touch with Moneysprite today to discuss your investment strategy and ensure you're making informed decisions about your financial future.
THE VALUE OF INVESTMENTS AND ANY INCOME FROM THEM CAN FALL AS WELL AS RISE AND YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
HM REVENUE AND CUSTOMS PRACTICE AND THE LAW RELATING TO TAXATION ARE COMPLEX AND SUBJECT TO INDIVIDUAL CIRCUMSTANCES AND CHANGES WHICH CANNOT BE FORESEEN.
Approved by The Openwork Partnership on 26/01/2026.
