How this instrument works
UK capital gains tax charges only the profit on a disposal — the price you sold for minus what you originally paid, plus qualifying costs — not the total sale proceeds, and only the slice of that profit that survives the annual tax-free allowance. The allowance is subtracted first, which is why the arithmetic floors the taxable amount at zero: a gain smaller than the allowance owes nothing, and the sum never produces a negative bill.
Retail investors selling shares or fund units held outside an ISA, and anyone disposing of a valuable asset such as a business stake or a collectible above the chattels exemption, are the typical users of this sum. Once the allowance is subtracted, the rate applied to what remains depends on the seller's income tax position for the year — 10% for basic-rate taxpayers and 20% for higher or additional-rate taxpayers, on most assets other than residential property.
The model has real edges worth knowing. It does not net capital losses against the gain before applying the allowance, it does not use the separate 18%/28% band that residential property disposals carry, and it treats the rate flag as one switch applied to the entire gain rather than splitting a gain that straddles both income tax bands partway through. Reliefs such as Business Asset Disposal Relief, which can lower the rate further for qualifying business sales, sit outside this sheet too.
- Enter the profit from the sale into Capital gain, £ — proceeds minus what you paid and any allowable costs, not the raw sale price.
- Set Annual tax-free allowance, £ to the exempt amount for the tax year in question; the sheet defaults to £6,000 but check HMRC's current figure before relying on it.
- Set Higher/additional rate taxpayer (1=yes, 0=no) to 1 if adding the gain to your other income for the year pushes you into the higher or additional-rate band, otherwise leave it at 0.
- Read Taxable gain after allowance — what's left once the allowance is subtracted, floored at zero.
- Read Capital gains tax due — that taxable gain multiplied by 10% or 20%, depending on the rate flag.
Worked example — a £15,000 gain, basic-rate taxpayer
Say you sold a stocks-and-shares holding outside an ISA for a £15,000 profit — that goes into Capital gain, £. Your Annual tax-free allowance, £ for the year is £6,000, and your total income keeps you inside the basic-rate band, so Higher/additional rate taxpayer (1=yes, 0=no) stays at 0.
The instrument subtracts the allowance first: £15,000 minus £6,000 leaves a Taxable gain after allowance of £9,000. Because you're a basic-rate taxpayer, that £9,000 is multiplied by 10% rather than 20%, so Capital gains tax due comes to £900 — a little under half of what a higher-rate taxpayer would owe on an identical sale.
Questions
What counts toward the Capital gain, £ figure?
The profit after allowable costs — sale proceeds minus what you originally paid, plus costs like broker or legal fees and qualifying improvement work. It excludes your main home in most cases, which usually qualifies for a separate relief, and residential property gains sit outside this sheet anyway, since they carry their own higher rate band rather than the 10%/20% modeled here.
Why does the tax-free allowance matter so much?
It comes off the top before any rate is applied, so every pound inside the Annual tax-free allowance, £ field is tax-free and only the remainder is taxable. The allowance is a use-it-or-lose-it figure for each tax year — it does not carry forward if unused — and it has been cut sharply in recent years, so check HMRC's current amount rather than reusing an old one.
How do I know if I'm a higher or additional-rate taxpayer for this sale?
Add the taxable gain on top of your other taxable income for the year and see which income tax band the total lands in, not just your salary alone. Someone with a modest salary but a large one-off gain can be pushed into the higher-rate band for part or all of that gain, which is why the flag depends on your position after the sale, not before it.
Does this handle a gain that straddles both tax bands?
No — Higher/additional rate taxpayer (1=yes, 0=no) is a single switch, so the sheet applies one flat rate to the whole taxable gain rather than splitting it at the point your income crosses into the higher band. If your gain genuinely straddles both bands, treat the result as an approximation and run the calculation twice, once for each portion, for an exact figure.
Why isn't residential property covered by this rate?
Because gains on residential property that aren't covered by relief on a main home are taxed at separate, higher rates than shares, funds, or most other assets, and folding both schedules into one flat 10%/20% figure would misstate one or the other. If you're selling a rental property or second home, use HMRC's property-specific rate rather than this general-asset figure.
Can capital losses reduce the Capital gain, £ figure?
Yes in principle — losses realised in the same tax year, and unused losses carried forward from earlier years, are deducted from gains before the annual allowance is applied. This sheet takes a single net gain figure, so if you're netting several disposals against losses, work out that net total first and enter it here rather than the raw sale profit.
References
- GOV.UK — Capital Gains Tax: overview
- GOV.UK — Capital Gains Tax rates and allowances
- GOV.UK — Report and pay Capital Gains Tax
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.