Capital Gains Tax

What Is Capital Gains Tax?

Capital gains tax (CGT) is a tax levied on the profit made from selling a capital asset — such as shares, property, cryptocurrency, business assets, or collectibles. The gain is calculated as the difference between the sale price (proceeds) and the original purchase price (cost basis), adjusted for eligible costs.

Unlike income tax, which applies to ongoing earnings, CGT is typically triggered only when you dispose of an asset. Some countries treat gains as ordinary income; others have separate, often lower, preferential rates.

Short-Term vs Long-Term Gains (US)

The United States makes a critical distinction:

• Short-term capital gains (assets held 1 year or less): Taxed as ordinary income at your marginal income tax rate (up to 37%)
• Long-term capital gains (assets held more than 1 year): Taxed at preferential rates of 0%, 15%, or 20% depending on income

For 2026, the long-term CGT thresholds for single filers are approximately:

• 0%: taxable income up to $47,025
• 15%: $47,026 – $518,900
• 20%: above $518,900

High-income earners also pay the Net Investment Income Tax (NIIT) — an additional 3.8% on investment income including capital gains — bringing the effective maximum US federal rate on long-term gains to 23.8%.

The US incentivizes long-term investing: holding an asset for over a year can more than halve your tax rate on the gain.

United Kingdom

The UK taxes capital gains separately from income, with gains on most assets taxed at:

• Basic-rate taxpayers: 18% (residential property) or 10% (other assets)
• Higher/Additional-rate taxpayers: 24% (residential property) or 20% (other assets)

Each individual has an Annual Exempt Amount (AEA) — £3,000 for 2026/27 — below which no CGT is owed. This was reduced from £12,300 in 2022, significantly increasing the number of people paying CGT.

UK residents also benefit from a Capital Gains Tax uplift on death: assets inherited receive a stepped-up cost basis to the market value at death, so inherited gains are wiped out for CGT purposes.

Canada

Canada does not have a separate capital gains tax rate. Instead, a fraction of the gain — the inclusion rate — is added to ordinary income and taxed at your marginal income tax rate.

From June 25, 2024, the inclusion rate increased:

• Individuals: 50% on the first $250,000 of gains per year; 66.7% on gains above that
• Corporations and trusts: 66.7% on all gains

With Ontario’s top combined federal + provincial marginal rate of ~53.5%, the effective maximum CGT rate on large gains became approximately 35.7%.

Canada also provides a Lifetime Capital Gains Exemption (LCGE) of approximately CA$1,016,602 on qualifying small business shares and farm/fishing property.

Australia

Australia taxes capital gains as part of ordinary income, but assets held for more than 12 months receive a 50% discount — meaning only half the gain is included in taxable income.

For a high-rate taxpayer (45% marginal), the effective maximum CGT rate is:

• Short-term: 45%
• Long-term (with 50% discount): 22.5%

The CGT discount is lower (33.3%) for superannuation funds, and unavailable for companies. Primary residences are generally exempt from CGT.

India

India taxes capital gains in two categories:

Short-term capital gains (STCG):

• On listed equity shares (held less than 12 months): 20% flat (from July 23, 2024)
• On other assets (held less than 24–36 months depending on asset type): taxed at ordinary slab rates

Long-term capital gains (LTCG):

• On listed equity shares and equity mutual funds (held more than 12 months): 12.5% flat on gains exceeding ₹1,25,000 per year
• On other assets: 12.5% without indexation

Ireland

Irish CGT is currently 33% on most gains, one of the highest rates in Europe. Each individual has an annual exempt amount of €1,270. The principal private residence (your home) is generally exempt.

Singapore

Singapore famously has no capital gains tax. Gains from selling investments, property, or businesses are generally not taxable. The exception is if the Inland Revenue Authority of Singapore (IRAS) determines you are “trading” (i.e., conducting a business of buying and selling assets), in which case profits are treated as ordinary business income.

South Africa

South Africa taxes capital gains through an inclusion rate added to ordinary income:

• Individuals: 40% of the gain included (effective max rate: ~18% at 45% marginal)
• Companies: 80% inclusion (effective rate: ~22.4% at 28% corporate rate)

Annual exclusion: R40,000 per year for individuals. The primary residence exclusion is R2,000,000 on gains.

Key Cross-Border Considerations

If you are tax-resident in one country but have assets in another, you may face capital gains tax in both jurisdictions. Double Tax Agreements (DTAs) typically provide relief, usually by giving taxing rights to your country of residence or providing a credit for tax paid in the source country. See Double Taxation Agreement for details.

Key Takeaway

Capital gains tax rules vary enormously across countries — from Singapore’s zero CGT to Ireland’s 33%, with fundamentally different calculation methods in between. US long-term rates can be as low as 0%, while Canada’s inclusion-rate system and Australia’s 50% discount create effective rates well below headline income tax rates. Always factor CGT into investment and relocation decisions.