How is Capital Gains Tax calculated on selling shares outside an ISA?

Full answer

Selling shares held directly (rather than within an ISA or pension wrapper) can trigger a Capital Gains Tax liability, and understanding how the gain is calculated and taxed helps avoid an unexpected bill. **Calculating the gain** The taxable gain is broadly the sale proceeds, minus what you originally paid for the shares, minus allowable costs (such as dealing/broker fees on both purchase and sale) -- if you have bought the same company's shares at different times and prices, specific share-matching rules (broadly, same-day acquisitions first, then acquisitions within the following 30 days, then a pooled 'section 104' average cost basis for older holdings) determine which cost is used against which disposal. **The annual exempt amount** Every individual has a £3,000 annual CGT exempt amount for 2026/27, meaning the first £3,000 of total gains across all disposals in the tax year (not just from shares) is entirely tax-free -- only gains ABOVE this exempt amount are taxable. **The two CGT rates for shares** Gains on shares (and most other assets besides residential property, which has its own separate, higher rates) above the exempt amount are taxed at 18% if the gain falls within your remaining basic rate band, or 24% for any portion falling in the higher or additional rate band -- because the rate depends on your TOTAL income plus gains, the same size of gain can be taxed at different effective rates depending on how much other income you have in the same tax year. **Worked example** Someone with £45,000 of other taxable income sells shares for a £10,000 gain in the same tax year. The first £3,000 of the gain is covered by the annual exempt amount, leaving £7,000 taxable. Because their other income of £45,000 leaves only £5,270 of basic rate band remaining (£50,270 basic rate threshold minus £45,000), £5,270 of the gain is taxed at 18% (£948.60) and the remaining £1,730 at 24% (£415.20), giving a total CGT bill of £1,363.80. **Reporting and paying** Capital Gains Tax on shares is reported via Self Assessment (or, in some cases, using HMRC's 'real time' CGT reporting service outside Self Assessment) -- unlike residential property gains, which must generally be reported and paid within a strict 60-day window of completion, share gains are normally reported through the usual annual Self Assessment timetable, though you should still keep accurate records of every purchase and sale throughout the year. **Reducing the bill legitimately** Using your full annual exempt amount each year (rather than letting it go unused, since it cannot be carried forward), spreading disposals across tax years where practical, transferring shares to a spouse or civil partner before sale (transfers between spouses are generally free of CGT, potentially using both people's exempt amounts), and offsetting any capital losses from other disposals are all legitimate ways to manage the overall tax bill. **Practical tip** Keep detailed records of every share purchase and sale (dates, prices, costs, and quantities), since the share-matching rules can make manual gain calculations complex for shares bought at different times, and consider using a CGT-tracking tool or your broker's own gain/loss reporting to avoid errors when completing your Self Assessment return.

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