What is capital gains tax and how does it affect my investments?
You pay CGT on profits from selling investments outside tax wrappers. The annual allowance is £3,000. Gains above this are taxed at 18% (basic-rate taxpayers) or 24% (higher/additional-rate taxpayers).
How CGT works in practice
CGT only applies to investments held outside an ISA or pension. It is charged on the profit — the gain — when you sell. If you sell shares worth £50,000 that you bought for £30,000, your gain is £20,000. After the £3,000 allowance, £17,000 is taxable. At 24% for a higher rate taxpayer, that's £4,080 in tax.
How to reduce your CGT bill
- Use your £3,000 annual allowance every year — it's use-it-or-lose-it
- Offset losses against gains in the same tax year
- Transfer assets to a spouse or civil partner before selling (transfers between spouses are CGT-free)
- Move assets into your ISA via Bed & ISA to shelter future growth
Key takeaway: CGT is manageable once you understand the £3,000 allowance and the Bed & ISA strategy.
Arken calculates your unrealised gains across all holdings and shows the most tax-efficient way to realise or shelter them.
