Glossary · UK
What is Section 104 (S104) Share Pool?
The HMRC share identification method that aggregates all shares of the same class held outside an ISA into a single pool valued at average cost, used to calculate the base cost for CGT when shares are disposed of.
Full Definition
Section 104 of the Taxation of Chargeable Gains Act 1992 establishes the share pool, which is the primary method used to identify shares for CGT purposes in the UK. When an investor buys shares of the same class in the same company on multiple occasions, those shares are not tracked individually -- instead they are pooled together and their total cost is divided by the total number of shares to produce an average cost per share. When shares are sold, the gain is calculated using this average pool cost as the base cost. HMRC applies three share identification rules in order before reaching the S104 pool: (1) Same-day rule -- shares bought and sold on the same day are matched first; (2) 30-day rule (the bed-and-breakfast rule) -- shares bought within 30 days after a sale are matched to that sale, preventing investors from deliberately crystallising a CGT loss and immediately repurchasing to reset the base cost; (3) S104 pool -- all remaining shares, in the order they were acquired, pooled at average cost. When new shares are added to the pool (through purchase, rights issues, or dividend reinvestment), the pool cost is recalculated: total cost of existing pool plus cost of new shares, divided by total shares after acquisition. Bonus shares and stock splits do not change the pool cost (the cost per share adjusts automatically with the new share count). Rights issue shares are added at the subscription price paid. Shares held within an ISA are entirely outside the S104 pool and are not subject to CGT on disposal. A practical example illustrates the calculation: 100 shares bought at GBP 10 each (pool cost GBP 1,000) and 50 more bought at GBP 16 each (GBP 800) create a pool of 150 shares at a total cost of GBP 1,800, giving an average of GBP 12 per share. Selling 60 shares at GBP 15 yields proceeds of GBP 900 and a pool base cost of GBP 720 (60 multiplied by GBP 12), giving a chargeable gain of GBP 180 before the Annual Exempt Amount (GBP 3,000 for 2026/27).