Answers · UK 2025/26
How does the Section 104 share pool work for CGT on UK shares?
The S104 pool treats all shares of the same class held by a taxpayer as a single pool at average cost. When shares are sold, the gain is calculated using this average cost after applying the same-day and 30-day matching rules first.
Full answer
When you hold shares in the same company bought at different times and prices, HMRC's share identification rules determine which shares you are treated as selling. The Section 104 (S104) pool is the third and most commonly used rule. Three share matching rules (applied in order) 1. Same-day rule: shares sold are matched first against shares bought on the same day. 2. 30-day rule (bed-and-breakfasting rule): shares sold are matched against shares bought within 30 days after the sale date. This prevents the artificial creation of losses by selling and immediately re-buying. 3. S104 pool: remaining unmatched shares are matched against the pooled holding. How the S104 pool works The S104 pool holds all shares of the same class in the same company as a single pool with a single average cost. Each time you buy shares, they are added to the pool and the total cost is recalculated at the new average. When you sell, you calculate the gain using the pool's average cost per share. Example January 2024: buy 1,000 shares at GBP 2 each. Pool: 1,000 shares, cost GBP 2,000, average GBP 2.00 June 2024: buy 500 shares at GBP 4 each. Pool: 1,500 shares, cost GBP 4,000, average GBP 2.67 March 2025: sell 600 shares at GBP 5 each. Proceeds: GBP 3,000. Pool cost for 600 shares: 600 x GBP 2.67 = GBP 1,600. Gain = GBP 1,400. Pool reduces to 900 shares, cost GBP 2,400. Pool adjustments -- Rights issues: new shares taken up in a rights issue enter the pool at the subscription price, increasing the pool cost -- Scrip dividends (stock dividends): shares received as scrip dividends enter the pool at market value on the date received (taxed as income dividend on receipt) -- Bonus issues (capitalisation issues): free shares from a bonus issue do not change the total pool cost -- the average cost per share falls -- Share reorganisations and takeovers: treated under specific reorganisation rules, generally on a cost-splitting basis ISA shares are separate Shares held in an ISA are outside the S104 pool. Sales of ISA shares are fully exempt from CGT and never enter the identification rules. Annual Exempt Amount In 2026/27 the CGT Annual Exempt Amount (AEA) is GBP 3,000. Gains from share disposals above this amount (net of losses) are subject to CGT at 18% (basic-rate band) or 24% (higher rate) for most assets.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.