Capital Gains Tax on Shares UK 2025/26: A Practical Guide

Quick answer

When you sell shares outside an ISA or pension for more than you paid for them, you've made a capital gain. Above the £3,000 annual exemption (2025/26), the gain is taxed:

• 18% on the gain in the basic-rate band slice.
• 24% on the gain in the higher-rate band slice.
• Combined with your other income to determine which rate applies.

For most non-ISA share investors, the practical implication is:

1. Use your £3,000 exemption each year by crystallising small gains.
2. Move shares into ISAs / pensions over time.
3. Use spousal transfers to split gains across two £3,000 allowances.
4. Carry losses forward indefinitely.

Worked example — Mark, higher-rate, sells £10,000 of shares

Mark bought 1,000 shares of ABC at £4 each in 2020 (total £4,000). Sells all in 2025/26 for £10 each (total £10,000).

• Gain: £10,000 - £4,000 = £6,000.
• Annual exemption: -£3,000.
• Taxable gain: £3,000.
• Mark's income: £55,000 — higher-rate band fully used.
• The £3,000 gain stacks on top, all in higher-rate band.
• CGT at 24%: £720.

Mark reports this on Self Assessment for 2025/26 by 31 January 2027.

Section 104 pooling — the crucial concept

UK CGT on shares uses Section 104 pooling. All shares of the same security form a single pool with averaged cost.

You can't pick which specific share lot you "sold" — they're treated as a pool with weighted-average cost.

Pool example

Sarah buys:

• 100 shares ABC at £5 = £500 (May 2020)
• 200 shares ABC at £8 = £1,600 (March 2023)

Pool: 300 shares, total cost £2,100, average £7/share.

She sells 150 shares in 2025/26 for £12 each = £1,800 proceeds:

• Cost: 150 × £7 = £1,050.
• Gain: £750.

Pool after disposal: 150 shares remaining at £7 average (£1,050 total cost).

The same pool persists indefinitely — every future ABC purchase or sale uses this pool.

Different securities = different pools

Pools are per security:

• Each company's shares is its own pool.
• Different share classes (e.g. preferred vs ordinary) is a separate pool.
• An ETF and an underlying company are different pools.
• Adjustments for stock splits, scrip dividends and corporate actions can shift pool costs.

The 30-day rule (bed-and-breakfast)

To stop people gaming the system by selling and immediately re-buying (e.g. to crystallise a loss or use the £3,000 exemption), HMRC has the 30-day rule:

Any acquisitions of the same security within 30 days of a disposal are matched against the disposal first (not the pool).

Worked example

Lisa wants to crystallise a £500 loss in ABC to offset against gains in XYZ.

She:

• Sells 100 ABC on 1 December for £400 (cost basis £900) — £500 loss.
• Buys 100 ABC back on 5 December for £400.

Without the 30-day rule: loss claimed; she now has 100 shares back at £400 basis.

With the 30-day rule:

• The 1 December disposal is matched against the 5 December purchase.
• Disposal proceeds £400 vs cost £400 (new buy).
• Gain/loss = £0.
• The original 100 ABC at £900 are still in her pool — loss not crystallised.

The 30-day rule kills naive wash-sale tax planning.

How "Bed and ISA" gets around the 30-day rule

The 30-day rule doesn't apply when the beneficial owner changes. Selling outside an ISA and buying back inside an ISA is treated as a fresh acquisition by you-as-ISA-holder rather than you-personally.

Bed and ISA mechanic:

1. Sell shares from your general investment account.
2. Realise the gain (within £3,000 exemption = no tax).
3. Buy back the same shares inside your ISA (within £20,000 annual ISA limit).
4. From now on, those shares are inside the ISA wrapper — future gains and dividends are tax-free forever.

Most UK platforms (Hargreaves Lansdown, AJ Bell, Vanguard) offer "Bed and ISA" as a single transaction with low/no fees.

This is a powerful annual planning move: gradually shift your unwrapped portfolio into the ISA over years, crystallising £3,000 of gain tax-free each year.

Bed and spouse — using both exemptions

Spousal transfers are also exempt from the 30-day rule:

1. Sell shares in your account, realise gain.
2. Buy the same shares back in your spouse's account.
3. They now own the shares with a fresh cost basis.
4. Either of you can sell, using your respective £3,000 exemption.

Over a few years, a couple can shift £30,000+ of unwrapped gains into ISA shelter using £3,000 exemption × 2 people × multiple years.

Reporting on Self Assessment

You must report capital gains on Self Assessment for the tax year if either:

• Total proceeds (gross disposals) exceeded £50,000, OR
• Total gains exceeded the £3,000 exemption.

If neither: you can opt to report anyway to register losses for future use.

Reporting goes on SA108 (Capital Gains) — separate from main Self Assessment supplement.

Deadline: 31 January following the end of the tax year.

For high-volume traders (hundreds of disposals per year), use crypto/share tax software (Sharesight, GovGrant Calculator) to aggregate.

Loss harvesting

If you have shares showing a paper loss, selling them realises the loss for tax purposes. Losses can offset gains in the same year and carry forward indefinitely for future use.

To register a loss: declare it on Self Assessment for the year of disposal, within 4 years.

Don't forget — even if you have no gains in the current year, registering the loss puts it on HMRC's record for future use against larger gains.

The 30-day rule applies to losses too — you can't repurchase within 30 days and claim the loss.

CGT rate stacking with income

Your gains stack on top of your income to determine which CGT rate applies.

Example — Tom, £40k salary, £8k gains in 2025/26

• Salary £40k uses £37,430 of basic-rate band (£50,270 - £12,570 PA).
• Remaining basic-rate room: £50,270 - £40,000 = £10,270.
• £3,000 of gain absorbed by exemption.
• £5,000 of gain remaining.
• All £5,000 sits in basic-rate room.
• CGT at 18%: £900.

If Tom were instead a £65k earner:

• Higher-rate band fully used by salary.
• £5,000 of gain (after exemption) all in higher-rate band.
• CGT at 24%: £1,200.

Higher earners pay materially more CGT on the same gain.

Combining with Business Asset Disposal Relief (BADR)

For shares in your own trading company (where you're a director/officer and 5%+ shareholder), BADR may apply:

• 14% rate (was 10% pre-April 2025) — rising to 18% from April 2026.
• Lifetime £1m allowance.
• Reduces taxable rate to 14% from the normal 18-24%.

If you're planning to sell your own-company shares: review timing carefully — a sale before April 2026 captures the 14% rate; after that's it's 18%.

ISA wrapper — the clean answer

The cleanest CGT planning approach: don't accumulate non-ISA holdings.

For most retail UK investors with under £40k of new annual contributions:

• Use £20k ISA allowance per person each year.
• Couples: £40k/year combined.
• New money goes into the ISA from day one.
• Existing unwrapped portfolio: gradual Bed-and-ISA migration over years.

After 10+ years of consistent ISA use, most of your investment wealth is sheltered and the £3,000 CGT exemption becomes irrelevant.

Common mistakes

1. Selling without considering the £3,000 exemption — wastes the annual allowance.
2. Crystallising losses then buying back immediately — 30-day rule eats the loss.
3. Forgetting to register losses with HMRC for future use.
4. Mis-pooling — treating purchases as separate lots rather than averaged.
5. Missing the 60-day property reporting for residential property disposals (separate rule).

Try the numbers

For overall tax position:

Sources

• HMRC: Capital Gains Tax
• HMRC: Tax when you sell shares
• HMRC: CGT computation manual
• HMRC: Section 104 holdings