Definition
Capital gains tax (CGT) is the tax on the profit (gain) realised when an asset is sold or otherwise disposed of for more than its acquisition cost. It is applied at jurisdiction-specific rates with country-specific exemptions, allowances, indexation rules, and concession schemes. The UK, AU, and CA have explicit CGT regimes (though AU and CA fold capital gains into income tax with specific treatment). NZ and SG do not have general CGT regimes, though specific situations are taxable.
What capital gains tax means in practice
For a bookkeeper, CGT becomes relevant when a business or its owner disposes of a fixed asset, an investment, a property, or shares in another company. The bookkeeping entry for the disposal is straightforward (debit cash for sale proceeds, credit the asset’s gross cost and the accumulated depreciation, recognise any gain or loss in the P&L). The tax computation runs separately, applying the country-specific CGT rules to the realised gain.
The most common SMB CGT scenarios: selling a vehicle that was a fixed asset (UK chargeable assets generally include vehicles unless they qualify as a wasting asset exemption), selling an investment property, exiting a business via share sale (Business Asset Disposal Relief in UK at 14% rising to 18% from April 2026, AU small business CGT concessions). For owner-managed company directors, the tax efficiency of a share-sale exit vs an asset-sale exit is often the largest single tax planning decision of their working life.
A practical example: a UK director sells their owner-managed company for 1.5 million in 2026-27. They qualify for Business Asset Disposal Relief on the first 1 million of gain (14% rate) and pay the higher CGT rate (24%) on the remaining 500,000. After the 3,000 Annual Exempt Amount and assuming a 2,000 acquisition cost: gain 1,495,000. BADR applied to 1,000,000 = 140,000 tax. Higher rate applied to 495,000 = 118,800 tax. Total CGT: 258,800. The equivalent gain taken via salary or dividend would have attracted PAYE / NIC / dividend tax at much higher effective rates.
How capital gains tax works by country
United Kingdom
Annual Exempt Amount 2026-27: 3,000 for individuals (reduced from 6,000 in 2023-24 and 12,300 before that). Rates: 18% in the basic rate band and 24% in the higher and additional rate bands for most chargeable assets, including residential property since 30 October 2024 (when the residential-property rate was harmonised with the general rates). Business Asset Disposal Relief (formerly Entrepreneurs’ Relief): 14% lifetime rate on the first 1 million of qualifying gains on the sale of a business or business assets, with the rate rising to 18% from 6 April 2026. The 1 million lifetime cap has been in place since 11 March 2020 (down from 10 million before that).
Australia
No separate CGT regime; capital gains are added to assessable income and taxed at the marginal income tax rate. Individuals get a 50% discount on the gain for assets held more than 12 months (the CGT discount). Small business CGT concessions (15-year exemption, 50% active asset reduction, retirement exemption up to AUD 500,000 lifetime, rollover relief) can reduce or eliminate gains on the sale of an active business. The combination of the 50% discount plus the small business concessions makes the AU effective CGT rate on small business sales often very low.
Canada
Capital gains are 50% included in income for tax (the inclusion rate was briefly raised to 66.67% on gains above CAD 250,000 in 2024 but reverted to 50% for 2025 onward following political pressure). Combined federal and provincial marginal rates on the included portion: roughly 23-27% top effective rate on capital gains. The Lifetime Capital Gains Exemption (LCGE) covers up to CAD 1,016,836 (2024 amount, indexed) of gains on the sale of qualified small business corporation shares or qualified farm or fishing property.
New Zealand
New Zealand does not have a general CGT. Specific situations are taxable: the bright-line test on residential property (currently a 2-year period from 1 July 2024, reduced from 10 years), property trading as a business activity, and share dealing as a business activity. The absence of a general CGT is the most distinctive feature of NZ tax compared with comparable jurisdictions.
Singapore
Singapore does not have a general CGT. Capital gains are generally tax-free. The exception is where the gains are deemed “revenue in nature” rather than “capital in nature” under the badges-of-trade test: gains from property trading, share dealing as a business activity, or any sustained pattern that looks more like a trade than an occasional capital disposal can be reclassified and taxed as income at the prevailing personal or corporate tax rate.
Related terms
CGT applies on disposal of long-lived assets:
- Fixed assets are the most common CGT-triggering asset category.
- Depreciation reduces the asset’s tax base over time, affecting the gain on disposal.
- Net profit includes accounting gain or loss on disposal but the tax treatment runs through CGT separately.
- Retained earnings is affected by both the accounting gain and the CGT charge.
See also
For the underlying fixed-assets that often trigger CGT on disposal, see the fixed assets entry.
FAQ
See the answered questions above for the 2026-27 UK residential property rates, NZ’s absence of CGT, and SG capital-vs-revenue treatment.