Capital gains tax (CGT) is a tax on the profit you make when selling an asset for more than you paid. Understanding CGT rules in your country is essential for calculating net investment returns and structuring your portfolio efficiently.
United States
The US distinguishes between short-term and long-term capital gains based on holding period.
Short-term gains (assets held less than 1 year) are taxed as ordinary income at rates from 10% to 37%.
Long-term gains (assets held 1 year or more) benefit from reduced rates:
| Taxable income (single filer, 2025) | Long-term CGT rate |
|---|---|
| Up to $47,025 | 0% |
| $47,026 - $518,900 | 15% |
| Over $518,900 | 20% |
An additional 3.8% Net Investment Income Tax (NIIT) applies above certain income thresholds, bringing the effective top rate to 23.8%.
Tax-loss harvesting is a popular US strategy: sell losing positions to offset gains, reducing your tax bill while maintaining market exposure by purchasing similar (but not identical) assets.
United Kingdom
The UK applies CGT on gains above an annual tax-free allowance.
| Tax year 2025/26 | Detail |
|---|---|
| Annual exempt amount | £3,000 |
| Basic rate taxpayer | 10% (18% on residential property) |
| Higher/additional rate taxpayer | 20% (24% on residential property) |
The ISA (Individual Savings Account) allows up to £20,000 per year in tax-free investments. All gains and income within an ISA are completely exempt from CGT and income tax, making it the most powerful tax shelter available to UK investors.
France
France applies the Prelevement Forfaitaire Unique (PFU), also called the flat tax, at a combined rate of 30%:
- 12.8% income tax
- 17.2% social contributions
Alternatively, taxpayers can elect to be taxed under the progressive income tax scale if that produces a lower liability. This option is beneficial for those in lower income brackets.
For shares held in a PEA (Plan d'Epargne en Actions) for more than 5 years, capital gains are exempt from income tax. Only the 17.2% social contributions apply, reducing the effective rate significantly.
Germany
Germany applies the Abgeltungsteuer (flat withholding tax) at 25% plus a 5.5% solidarity surcharge on the tax amount, plus church tax if applicable. The effective rate is approximately 26.375%.
| Component | Rate |
|---|---|
| Abgeltungsteuer | 25% |
| Solidarity surcharge (5.5% of 25%) | 1.375% |
| Effective total | 26.375% |
Germany provides a Sparerpauschbetrag (saver's allowance) of EUR 1,000 per person (EUR 2,000 for married couples) per year. Gains and investment income below this threshold are tax-free.
Cross-country comparison
| Country | Standard CGT rate | Tax-free allowance | Preferential vehicle |
|---|---|---|---|
| US | 0-20% (long-term) | None (but 0% bracket exists) | 401(k), Roth IRA |
| UK | 10-20% | £3,000/year | ISA |
| France | 30% flat | None | PEA (after 5 years) |
| Germany | 26.375% | EUR 1,000/year | None |
Tax-efficient strategies
Hold for the long term. In the US, holding for over one year halves the tax rate on gains. In France, the PEA rewards five-year holding periods.
Use tax-advantaged accounts. ISAs in the UK, PEAs in France, and Roth IRAs in the US shelter investments from all future taxation.
Harvest losses strategically. Realise losses to offset gains in the same tax year. In the US, up to $3,000 of net losses can offset ordinary income annually, with the remainder carried forward.
Gift to a spouse. In the UK, transfers between spouses are CGT-free, allowing couples to utilise both annual exemptions.