Capital Gains Tax on Shares UK: Complete Guide (2026/27)

Selling shares, funds, ETFs, or other investments for a profit in the UK can trigger a Capital Gains Tax bill — but the rules are more nuanced than they first appear. This guide explains exactly when CGT applies to shares, what rates you pay, how to calculate your gain, and practical steps to reduce your tax liability legally.

This is not financial or tax advice. Tax rules are complex and personal. Consult a qualified tax adviser for your specific situation.

Do You Pay CGT on Shares?

Capital Gains Tax applies when you dispose of shares or investment funds at a profit. Disposal includes:

• Selling shares
• Transferring shares to someone else (outside ISA or pension transfers)
• Giving shares away (except to a spouse or civil partner)
• Exchange or conversion of shares in a takeover
• Being bought out from a company

You do NOT pay CGT when:

• Shares are held inside a Stocks and Shares ISA
• Shares are held inside a pension (SIPP or workplace)
• You transfer shares to your spouse or civil partner
• Losses exceed gains that year
• Total gains are within the annual exempt amount (£3,000 for 2026/27)

CGT Rates on Shares — 2026/27

Note: These rates apply to shares, funds, and most investments. Residential property attracts higher rates (18% basic / 24% higher, but with different rules). CGT on residential property changed in April 2024 — the rates are now the same, but the reporting rules differ.

How Your Rate Is Determined

Your CGT rate depends on how much taxable income you have in the same tax year as the gain:

1. Calculate your total taxable income (salary, self-employment, etc.)
2. If your income is below the higher-rate threshold (£50,270), the gain is added on top of your income
3. The portion of the gain that falls within the basic rate band (up to £50,270 total) is taxed at 18%
4. Any gain above £50,270 is taxed at 24%

Example: You earn £40,000 salary and make a £15,000 capital gain on shares:

• Basic rate band remaining: £50,270 − £40,000 = £10,270
• After £3,000 exempt amount: taxable gain = £12,000
• £10,270 taxed at 18% = £1,849
• £1,730 taxed at 24% = £415
• Total CGT: £2,264

The Annual CGT Exempt Amount

Every individual has an annual Capital Gains Tax exempt amount — gains up to this threshold are completely tax-free:

The allowance was dramatically reduced in 2023 and remains at £3,000. Key rules:

• Lost if unused — it does not roll over to the next tax year
• Applies to total gains across all assets (shares, property, crypto, etc.)
• Married couples and civil partners each have their own £3,000 allowance — giving a combined £6,000

Calculating Your Capital Gain on Shares

The basic gain calculation is:

Gain = Disposal proceeds − (Acquisition cost + Allowable costs)

Allowable costs include:

• The original purchase price (including dealing charges paid at purchase)
• Broker commissions and platform fees at purchase and sale
• Stamp duty reserve tax (0.5%) paid when buying

What you CANNOT deduct:

• ISA or pension management fees
• Annual subscription fees to investment platforms (in most cases)
• Any costs already claimed as a business expense

The Share Pooling Rules

For CGT purposes, HMRC uses a “Section 104 pool” for shares in the same company. Instead of identifying exactly which shares you sold, all acquisitions of the same share are averaged:

If you sell 50 shares, the cost for CGT purposes is 50 × £53.33 = £2,667.

The 30-Day Matching Rule (“Bed and Breakfast” Rule)

To prevent artificial CGT avoidance, if you sell shares and buy the same shares back within 30 days, HMRC matches the sale to the repurchase (not the pool). This eliminates immediate gain crystallisation.

This is why Bed and ISA is the preferred strategy — you can rebuy immediately inside an ISA, bypassing the pool entirely.

ISA Shares: The CGT-Free Zone

Shares held in a Stocks and Shares ISA are completely exempt from:

• Capital Gains Tax on growth
• Income tax on dividends
• Reporting requirements to HMRC

The ISA annual allowance is £20,000 per tax year (2026/27). Transfers between ISA providers are not treated as disposals and trigger no CGT.

Choosing between ISA and general investment account (GIA):

Claiming Capital Losses

If you sell shares at a loss, you can use those losses to reduce your gains:

• Same-year losses: Automatically offset against gains in the same tax year
• Unused losses: Carried forward indefinitely to future years
• Reporting losses: Must be reported to HMRC within 4 years of the tax year end
• Connected persons: You cannot offset losses on sales to a connected person (e.g., spouse, family member)

Example of loss harvesting:

• You have £10,000 gain from selling Fund A
• You sell Fund B at a £4,000 loss
• Net gain: £6,000
• Less exempt amount: −£3,000
• Taxable: £3,000 at 18% = £540 CGT (instead of £1,260 on the full £7,000)

How Employee Shares Are Treated

Shares received through employee share schemes have special rules:

Shares from approved schemes that are transferred to an ISA within 90 days of exercise can be sheltered tax-free.

How to Reduce CGT on Shares — Legitimate Strategies

1. Use Your Annual Exempt Amount Every Year

The £3,000 exempt amount is lost each year. Even if you are not selling for liquidity reasons, consider selling enough to crystallise up to £3,000 of gains annually, then buying back outside the 30-day window (or inside an ISA immediately).

2. Bed and ISA

Sell shares from a general investment account and immediately buy them back inside your Stocks and Shares ISA. Since the ISA is a different legal wrapper, it is NOT subject to the 30-day matching rule.

• Realise up to £3,000 of gains tax-free using your exempt amount
• Future gains on those shares inside the ISA are completely tax-free
• Costs: bid-offer spread and any broker dealing charges

3. Bed and Spouse/Civil Partner

Transfer shares to a spouse or civil partner to use their £3,000 exempt amount or take advantage of their lower tax rate. Transfers between spouses are at no gain/no loss for CGT.

• Your spouse can then sell and use their own £3,000 exempt amount
• If they are a basic rate taxpayer and you are higher rate, the 18% applies rather than 24%

4. Carry Back Losses

Ensure all capital losses are reported to HMRC, even if you did not make profits that year. Losses can be carried forward indefinitely and used against future gains.

5. Pension Contributions

Making a pension contribution increases your basic rate band, potentially pulling your capital gain back from 24% to 18%.

Example: Your gain is £20,000 and your income is £55,000. Normally you’d pay 24% on the whole gain. If you contribute £10,000 to a pension, your adjusted income becomes £45,000 — within the basic rate band — so part of your gain is taxed at 18%.

Reporting CGT on Shares to HMRC

Do You Need to Report?

You must report gains to HMRC if:

• Total gains exceed the annual exempt amount (£3,000 in 2026/27), OR
• Total proceeds from all disposals exceed 4× the exempt amount (£12,000) — even if gains are below £3,000

How to Report

• Self-Assessment Tax Return: If you already file a tax return, report gains on the capital gains pages (SA108)
• CGT on UK Property Service: Only used for residential property (not shares)
• Report online via HMRC: For those not filing a full Self-Assessment return, use the Real Time CGT reporting service

Deadlines

• 31 January following the end of the tax year — for Self-Assessment filers
• Within 60 days of completion — only required for residential property sales (not shares)

Frequently Asked Questions

Do I pay CGT on reinvested dividends?

No. Reinvesting dividends (in accumulation funds or DRIP schemes) creates a new acquisition at the price when dividends were reinvested. This increases your acquisition cost for future CGT purposes but is not itself a disposal.

What about ETFs and investment funds?

ETFs and OEICs follow the same CGT rules as shares. For reporting purposes, each fund is pooled separately. “Offshore reporting funds” (non-UK ETFs) may have different rules — gains are taxed as income rather than capital gains if the fund does not have HMRC reporting status.

Do I pay CGT on shares I inherit?

No. Inherited shares are transferred at their market value at the date of death — this establishes a new acquisition cost. You only pay CGT if you sell for more than the inherited value. Any gains up to the date of death are handled through the estate (IHT applies instead).

Related Guides

• Capital Gains Tax Guide UK
• Bed-and-ISA Explained: How to Shelter Gains Tax-Free
• Stocks and Shares ISA Guide
• Capital Gains Tax Rates 2026/27
• How to Reduce Capital Gains Tax
• Self-Assessment Tax Return Guide