Capital Gains Tax on Shares: UK Rules Fully Explained

Capital Gains Tax on shares applies when you sell shares for more than they cost you, and your total gains exceed the annual tax-free allowance.

If you've sold shares this year and made a profit, you may owe Capital Gains Tax. With the annual tax-free CGT allowance sitting at just £3,000 for 2025/26, far more people are finding themselves with a bill they didn't expect.

Here's what you need to know.

Key points

• Your CGT rate depends on your total income 💷
  HMRC adds your capital gains on top of your taxable income. Gains falling within the basic rate band are taxed at 18%, while anything above the higher rate threshold is taxed at 24%.
• ISAs and pensions can protect you from CGT 🛡️
  Shares held inside a Stocks & Shares ISA or pension are exempt from Capital Gains Tax. Using strategies like Bed and ISA can help protect future investment growth from tax.
• Capital losses can reduce future tax bills 📉
  If you sell shares at a loss, you can use those losses to offset gains and lower your CGT bill. Unused losses can also be carried forward indefinitely, as long as you report them to HMRC within four years.
• ANNA helps simplify CGT reporting and Self Assessment 🤝
  Tracking Section 104 pool calculations, gains, losses, and SA108 forms can get complicated quickly. ANNA automates the calculations, tracks your disposals year-round, and makes reporting much easier.

What is the Capital Gains Tax on shares?

Capital Gains Tax (CGT) is charged on the profit you make when you sell or 'dispose of' an asset that's gone up in value. With shares, that means the difference between what you paid for them (your cost basis, including any dealing fees) and what you sold them for.

It's not just about selling, though. Giving shares to someone other than a spouse or civil partner, exchanging them, or receiving compensation for them can all trigger a CGT event.

CGT allowances and rates for 2026/27

Here are the relevant figures for the current tax year:

The £3,000 annual exempt amount applies to each person per tax year, and you can't carry forward any unused allowance.

Which tax rate should I apply?

The rate you pay depends on where your capital gain sits relative to your income. HMRC stacks your gains on top of your taxable income for the year.

The higher-rate threshold is £50,270 for 2025/26. That figure is made up of the £12,570 Personal Allowance plus a £37,700 basic-rate band. If your income and gains combined stay below £50,270, you pay 18% on the gain. Once you cross it, anything above is taxed at 24%.

So if you earn £47,000 and make a £6,000 gain after your allowance, the first £3,270 would be taxed at 18% and the remaining £2,730 at 24%.

Does every share disposal trigger CGT?

Not every share transaction is a CGT event, and not all gains are taxed the same way.

Generally, CGT applies when you:

• Sell shares held outside an ISA or pension wrapper
• Give shares to someone who isn't your spouse or civil partner
• Receive a capital distribution from a company (in some circumstances)

Assets held inside a Stocks & Shares ISA, Lifetime ISA, or registered pension (such as a SIPP) are outside the CGT regime. Government bonds (gilts) are also exempt from CGT.

How gains on shares are calculated: Section 104 pooling

For UK investors, working out the cost basis isn't always as simple as looking at what you paid for a specific lot of shares. HMRC uses a rule called Section 104 pooling, also known as the share pool or average cost method.

Under this rule, all shares you hold in the same company are pooled together into a single 'pot'. When you buy more shares, they go into the pool, raising the average cost per share.

When you sell, you calculate your gain using the average cost across the entire pool, not the price you paid for any particular batch.

There are two additional rules you should take into account:

• Same-day rule: If you buy and sell shares in the same company on the same day, those acquisitions and disposals are matched against each other first.
• 30-day rule: If you sell shares and buy the same shares back within 30 days, those new purchases are matched against the sale instead of your pool. This prevents selling shares to crystallise a loss and immediately buying back in.

The rules are specific, and the maths can get complex across multiple purchases and sales. If you've traded actively, it may be worth speaking to an accountant before you file.

When do you need to report CGT on shares?

You'll typically need to report capital gains from share disposals if:

• Your total gains in the year exceed the £3,000 annual exempt amount
• Your total proceeds from disposals in the year exceed £50,000 (even if gains are below the allowance)
• You want to register a capital loss with HMRC so you can use it in future years

Unlike residential property disposals (which must be reported within 60 days of completion), there's no rapid-reporting rule for shares. You report via Self Assessment, and the deadline is 31 January following the end of the relevant tax year.

If you don't normally file a Self Assessment return, you can report a one-off gain using HMRC's real-time Capital Gains Tax reporting service on GOV.UK, and pay any tax owed immediately.

How capital losses work

If you sell shares at a loss, you can set it against gains made in the same tax year, which reduces the amount that is subject to CGT. If your losses exceed your gains, the remaining loss carries forward indefinitely and can be used against gains in future tax years.

There's one condition – you need to report the loss to HMRC within four years of the end of the tax year in which it occurred. Miss that window, and you lose the opportunity.

Don't forget that the 30-day rule applies to losses too. You can't engineer a loss by selling shares and buying them back straight away.

Practical ways to manage your CGT bill on shares

There are several legitimate strategies for reducing the amount of CGT you pay on shares over time.

Here are the most common ways to reduce your CGT bill:

Use your ISA allowance

Any gains made on investments inside a Stocks & Shares ISA are exempt. If you hold shares outside an ISA, you can sell them and use the proceeds to contribute up to £20,000 to an ISA in the same tax year, a process known as 'Bed and ISA'.

You'll crystallise a gain (or loss) on the sale, but all future growth inside the ISA is sheltered. Note that HMRC's 30-day rule doesn't apply here because you're buying inside an ISA wrapper rather than directly back into the same holding.

Transfer to your spouse or civil partner

Transfers between spouses and civil partners are treated as 'no gain, no loss' for CGT purposes at the point of transfer.

This means you can shift shares to a partner without triggering a CGT event, and they can then benefit from their own separate £3,000 annual exempt amount when they eventually sell. Couples effectively have £6,000 of annual CGT-free gains between them.

Spread disposals across tax years

If you're planning to sell a large holding, consider whether it's possible to sell in portions across two tax years rather than all at once. Each year brings a fresh £3,000 allowance.

Use losses to offset gains

Before the end of the tax year, it's a good idea to review your portfolio for any holdings sitting at a loss. Selling those results in a loss you can set against gains elsewhere.

🧠 Good to know:

The £3,000 annual exempt amount can't be transferred between spouses; each person has their own. The capital loss carry-forward is personal, too, so losses in your name can only be offset against your own future gains.

A note on employee share schemes

If you've received shares through an employer scheme, such as a Share Incentive Plan (SIP), Save As You Earn (SAYE), or Company Share Option Plan (CSOP), the tax treatment can be more complicated.

Depending on the scheme, you may have already paid Income Tax on the value of shares when you received them, and that forms part of your cost basis when calculating a capital gain on any future sale.

The rules vary by scheme type, so if you've received employer shares, check the specific guidance for that plan or speak to a tax adviser.

Take the CGT admin out of your Self Assessment with ANNA

Reporting capital gains through Self Assessment is one of those tasks that sounds straightforward until you're actually doing it. Tracking your disposal proceeds, working out your Section 104 pool costs, checking whether losses from previous years are still registered…It adds up quickly, especially if you've made several trades throughout the year.

ANNA's Auto Accountant pulls your transactions together automatically, so when January comes, your figures are already there rather than scattered across old contract notes and brokerage statements.

Here's what ANNA can do for you:

• Self Assessment filing included for free: Your 2026/27 tax return, SA108 Capital Gains pages included, is prepared and submitted automatically once your HMRC account is connected. Even if you've already paid another provider, ANNA will refund the filing fee when you switch.
• Automatic gain and loss tracking: Disposals are recorded as they happen, so your running total of gains and losses is always up to date.
• Loss carry-forward visibility: Any capital losses registered with HMRC are factored in automatically, so you're not leaving allowable deductions on the table.
• All-in-one financial setup: Your bank account, tax position, and records sit in one place, removing the need to cross-reference your broker statements with a separate tax tool.
• 24/7 support: If you have a question about how to report a particular disposal, real help is available around the clock.

Open an ANNA account and have your capital gains sorted well before the January deadline.