UK Tax on Shares Trading 2025/26 — CGT, Dividends & ISA Guide

Two tax events for share investors

UK tax law treats your share portfolio as a generator of two completely separate streams of taxable activity:

• Disposals → Capital Gains Tax. Whenever you sell, gift or otherwise dispose of a share, you crystallise a capital gain (or loss) equal to net proceeds minus allowable cost. The gain only becomes taxable above your Annual Exempt Amount.
• Dividends → Dividend Tax. Cash dividends received while you hold are taxed under a separate regime, with their own £500 allowance, their own rate ladder and their own band rules.

The two regimes use different rates, different allowances and different reporting triggers — but they interact through your total taxable income, because the band you fall into for dividends depends on your salary, self-employment, rental and pension income added together.

Capital Gains Tax 2025/26 on shares

Listed shares, unit trusts, OEICs and ETFs held outside an ISA or pension are subject to CGT on disposal. Two rate bands apply, determined by adding the gain to your other taxable income (after personal allowance):

The 30 October 2024 reform aligned non-residential CGT rates (shares, crypto, business assets) with residential property rates, removing the long-standing differential. The change took effect immediately for disposals from that date; pre-30-Oct 2024 disposals in the same tax year stay on the old 10% / 20% rates.

The Annual Exempt Amount (AEA) for 2025/26 is £3,000. Anyone whose total realised gains across all assets for the tax year stay within this allowance pays no CGT. The AEA was cut from £12,300 in 2022/23 to £6,000 in 2023/24 and to £3,000 from 2024/25 — a 75% cut in two years, dragging far more retail investors into reporting.

Capital losses set against same-year gains first; surplus losses carry forward indefinitely provided you claim them in writing within four years of the loss arising. Unused AEA cannot be carried forward.

Dividend Tax 2025/26

The Dividend Allowance for 2025/26 is £500 — the first £500 of dividend income each year is tax-free regardless of your other income. Above the allowance, dividends sit on top of your other taxable income and are taxed at:

The Dividend Allowance has been cut twice in three years — from £2,000 (to 2022/23) to £1,000 (2023/24) to £500 (2024/25 onwards). For higher-rate investors with sizeable income portfolios the cumulative cost of the cut is over £500 a year just in extra Dividend Tax.

The band an extra pound of dividend falls into is set by your total taxable income (salary + self-employment + rental + savings interest + dividends), notby dividends alone. A £80,000 salary already fills the basic-rate band, so all of your taxable dividends fall into the 33.75% higher-rate slice.

Share matching / pooling rules

When you sell shares of the same class in the same company, HMRC matches them against your historical purchases in a strict three-step order — not simply first-in-first-out. The rules are set out in HMRC helpsheets HS284 and HS285.

1. Same-day rule. Shares of the same class acquired on the same day as the disposal are matched first. The cost used is the acquisition cost on that same day.
2. 30-day "bed-and-breakfast" rule. Next, shares acquired in the 30 days after the disposal are matched on a FIFO basis. This prevents investors selling to crystallise losses or use the AEA, then immediately rebuying the same stock.
3. Section 104 holding. Anything still unmatched comes from the "Section 104 pool" — a single notional holding of all your remaining shares in that class, with a weighted-average cost across every historic purchase that has been added to it.

The 30-day rule has a notable carve-out for ISAs — repurchasing the same shares insidean ISA after selling outside is permitted and treated as a fresh acquisition by the ISA manager. This is the legal basis of the "bed-and-ISA" strategy below.

Worked example — CGT on a share sale

Worked example — Dividend Tax

The Stocks & Shares ISA wrapper

A Stocks & Shares ISA is a tax wrapper around an otherwise normal investment account. Inside an ISA:

• No CGT on disposals — sell as often as you like, no AEA needed, no reporting.
• No Dividend Tax on UK or overseas dividends (US withholding tax still applies, but no UK top-up).
• No interest tax on cash held inside the wrapper or on bond coupons.
• Nothing to declare on Self Assessment — ISA income is excluded from all UK tax tests, including child benefit charge and pension annual allowance taper.

The annual ISA allowance is £20,000for 2025/26, frozen since 2017/18. That cap is shared across all ISA types — Cash ISA, Stocks & Shares ISA, Innovative Finance ISA and Lifetime ISA combined. The Lifetime ISA has its own internal £4,000 limit and a separate set of withdrawal rules (25% government bonus, 25% penalty on non-qualifying withdrawals).

For medium-to-large portfolios the ISA is the single largest tax saving available to retail investors. A £100,000 portfolio yielding 4% dividends saves around £1,265 a year in Dividend Tax alone (higher rate, after the £500 allowance), and uncapped CGT savings on disposal.

GIA vs ISA — the decision

Bed-and-ISA strategy

If you already hold shares in a GIA, you can systematically migrate them into the ISA wrapper. The mechanism:

1. Sell shares in the GIA → realises a gain or loss.
2. Immediately repurchase the same shares inside your ISA → fresh ISA acquisition (the 30-day rule does not apply to ISA repurchases).
3. Future growth and dividends on those shares are now in the ISA — completely tax-free.

Done at the right scale, this realises a gain just under the £3,000 AEA every year — zero CGT — while progressively sheltering your portfolio. Brokers like Hargreaves Lansdown and AJ Bell offer a single "bed-and-ISA" trade that does both legs with one spread cost. Many investors split the £3,000 AEA across two tax-year ends (March and April) to effectively bed-and-ISA £6,000 of gain in a fortnight.

CFDs, spread betting and crypto

• Spread betting: classed as gambling under UK law. Profits and losses fall outside CGT and Income Tax — completely tax-free for individuals. Cannot be held in an ISA.
• CFDs (contracts for difference): taxable as CGT in the same way as shares. The notional underlying is irrelevant — the gain on closing the CFD is a chargeable disposal.
• Crypto-assets: HMRC treats most crypto as a chargeable asset. Disposals (sell to fiat, swap to a different coin, spend on goods) crystallise CGT. Staking rewards and mining income are taxable as miscellaneous income at the time of receipt. Same Section 104 pool mechanics, with each coin treated as its own pool.
• "Trader" status: HMRC rarely accepts that an active retail investor is carrying on a trade for tax purposes. Without trader status, gains are CGT not income tax — usually beneficial because CGT rates (18/24%) are lower than income tax rates (20/40/45%) and you keep the AEA. The default for almost all retail investors is investor status.

Reporting and payment

You must report share disposals to HMRC if any of the following apply in a tax year:

• Total chargeable gains across all assets exceed the £3,000 AEA;
• Total disposal proceeds exceed £50,000 (was £100,000 before 6 April 2023);
• You want to claim a capital loss against future gains;
• You are already in Self Assessment for any other reason — disposals must be disclosed regardless of amount.

The standard route is the Capital Gains pages (SA108) of the Self Assessment return, filed by 31 January following the end of the tax year. So gains made in 2025/26 (year ending 5 April 2026) must be filed and paid by 31 January 2027.

For taxpayers who are not in Self Assessment, HMRC offers the "Real Time Capital Gains Tax service" — a one-off online form that lets you report and pay a CGT liability immediately without joining the full SA regime. Useful for occasional disposals that nudge above the AEA without triggering any other SA requirement.

Recordkeeping

HMRC expects you to be able to evidence every figure on the CGT computation. Keep:

• Contract notes for every buy and sell.
• Broker statements showing custody history and corporate actions (rights issues, scrip dividends, mergers — each affects the pool).
• Dividend vouchers showing gross dividend, withholding tax and currency conversion.
• Spreadsheets or calculations supporting your Section 104 pool — a running total of cost and shares after every transaction.

Records must be kept for at least four yearsafter the end of the tax year they relate to, but most advisers recommend six years because HMRC has a six-year "discovery" window for careless errors and twenty years for deliberate behaviour. Records that support a Section 104 pool must logically be kept for as long as you still hold any shares in that pool — potentially decades.

Official sources

• HS284 — Shares and Capital Gains Tax (HMRC helpsheet).
• HS285 — Share reorganisations, company takeovers and Capital Gains Tax.
• HS287 — Employee share and security schemes and Capital Gains Tax.
• TCGA 1992 — Taxation of Chargeable Gains Act, the underlying primary legislation.
• ITTOIA 2005 — Income Tax (Trading and Other Income) Act, Part 4 covers dividends.
• gov.uk/tax-sell-shares — practical step-by-step guide.
• gov.uk/government/publications/individual-savings-accounts — ISA Manager rules.