Capital Gains Tax on shares in the UK: the £3,000 allowance, 18% and 24%, and average cost

What counts, and what does not

GOV.UK says you may have to pay Capital Gains Tax on shares that are not in an ISA or PEP, units in a unit trust, and certain bonds. You do not pay it when you dispose of:

• shares you have put into an ISA or PEP
• shares in employer Share Incentive Plans (SIPs)
• UK government gilts (including Premium Bonds) and Qualifying Corporate Bonds

You also do not usually pay it when you give shares to your husband, wife, civil partner or a charity.

Step 1: work out the gain

Your gain is usually the difference between what you paid and what you sold for. You can deduct certain costs of buying or selling, including stockbrokers' fees and the Stamp Duty Reserve Tax you paid when you bought. In some cases you use market value instead of the price paid, for example if the shares were a gift from someone other than your spouse, civil partner or a charity.

Shares bought at different times: the average cost

If you bought shares of the same type in the same company at different times, you usually work out the average cost. HMRC calls this pool a "Section 104 holding": each share in it is treated as if bought at the same average cost. GOV.UK's example:

Sell 150 shares and the cost you use is 150 × £1.10 = £165. Deduct that from the sale proceeds to get the gain. The remaining 250 shares stay in the pool at £1.10 each.

The same-day and 30-day rules

HMRC's helpsheet HS284 sets the order in which shares you sell are matched with shares you bought:

1. shares bought on the same day as the sale
2. shares bought in the 30 days after the sale (HMRC calls this the "bed and breakfasting" rule; it applies if you were UK resident when you bought them)
3. shares in the Section 104 pool

So if you sell and buy back the same shares within 30 days, the sale is matched with the new purchase, not your pool. In HS284's example, Mr Schneider sells 4,000 shares for £6,000 and buys 500 back 12 days later for £850: 500 of the shares sold are matched with that purchase (proceeds £750 against cost £850, a £100 loss), and the other 3,500 come out of his pool.

Step 2: add up your gains and take off the allowance

Add the gains from everything you disposed of in the tax year (6 April to 5 April), then deduct allowable losses. GOV.UK's tax-free allowance, the Annual Exempt Amount, is £3,000 (£1,500 for trusts). If your total taxable gains are under it, there is no tax to pay.

Losses

A loss you report is deducted from gains in the same tax year. Unused losses from earlier years are only deducted while your gains are still above the tax-free allowance, and anything left is carried forward. You can claim a loss up to 4 years after the end of the tax year you disposed of the asset. Losses on shares that become worthless or of "negligible value" can also be claimed.

Step 3: find your rate — 18% or 24%

From 6 April 2026, higher and additional rate taxpayers pay 24% on gains. For basic rate taxpayers GOV.UK sets out the method:

1. Work out your taxable income (income minus Personal Allowance and other reliefs).
2. Work out your total taxable gains and deduct the £3,000 allowance.
3. Add the result to your taxable income.
4. The part within the basic rate band (£37,700 for 2026/27) is taxed at 18%; anything above it at 24%.

GOV.UK's examples: taxable income £20,000 with gains of £12,600 gives £9,600 at 18% = £1,728; the same income with gains of £52,600 gives 18% on £17,700 and 24% on £31,900 = £10,842.

Worked examples: a £15,000 gain on shares

Bought for £10,000, sold for £25,000, no other gains, England, 2026/27:

The middle row shows why "basic rate taxpayer" is not the whole story: the gain itself can push part of the total into the 24% band.

Why ISAs matter here

Gains on investments held inside an ISA are not subject to Capital Gains Tax, and you do not need to declare ISA gains on a tax return. For 2026/27 you can pay up to £20,000 into ISAs. GOV.UK adds a limit worth knowing: "You cannot transfer any non-ISA shares you already own into an ISA unless they're from an employee share scheme." Shares you already hold outside an ISA stay subject to the rules above when you sell them. See our ISA allowance guide for the rest of the rules.

Step 4: report and pay

You do not get a bill: you must work out whether your gains are above the allowance. For gains on shares, you report in the tax year after the sale on a Self Assessment return or, if you are eligible, through HMRC's "real time" Capital Gains Tax service by 31 December in the tax year after the sale. Even if your gains are under the allowance, if you are registered for Self Assessment you need to report them when the total you sold assets for was more than £50,000 (2023 to 2024 onwards).

Frequently asked questions