CGT on Shares: How UK Investors Are Taxed (2026-27)

When you sell shares outside a tax-sheltered account like an ISA, any profit you make may be subject to Capital Gains Tax (CGT). For the 2026-27 tax year, the rates are 18% if you're a basic-rate taxpayer and 24% if you're a higher or additional-rate taxpayer—both significantly higher than the 10% and 20% rates that applied before the October 2024 Budget. You can make gains of up to £3,000 in the tax year before CGT applies, thanks to the Annual Exempt Amount. This guide explains how CGT on shares works, how to calculate what you owe, the special matching rules that determine which shares you've sold, and what steps to take if you've made a taxable gain.

What is Capital Gains Tax on shares?

Capital Gains Tax is a tax on the profit (the "gain") you make when you sell or dispose of an asset that has increased in value. Shares and other securities fall squarely within the scope of CGT [TCGA 1992 s.1]. The tax applies to the difference between what you paid for the shares (the "acquisition cost") and what you received when you sold them (the "disposal proceeds"), minus any allowable costs like broker fees or stamp duty.

Crucially, CGT is only charged when you dispose of shares. Simply holding shares that have gone up in value does not trigger a tax bill. A disposal includes selling shares on the open market, gifting them to someone (other than your spouse or civil partner), or exchanging them in certain corporate actions.

Shares held in an ISA are exempt

If your shares are held inside an Individual Savings Account (ISA), any gains you make are completely exempt from CGT. This is one of the main attractions of ISAs: you can buy and sell shares within the ISA wrapper without ever worrying about capital gains. The same applies to gains within a pension. This guide focuses on shares held outside these tax-sheltered accounts.

The 2026-27 rates and Annual Exempt Amount

For the 2026-27 tax year, the CGT rates on shares and most other chargeable assets are:

• 18% if your total taxable income (after allowances and deductions) falls within the basic-rate band
• 24% if any part of your income is taxed at higher or additional rate

These rates increased sharply from 10% and 24% respectively following the October 2024 Budget, making share disposals considerably more expensive from a tax perspective.

The £3,000 Annual Exempt Amount

Every UK resident individual has an Annual Exempt Amount (AEA)—sometimes called the CGT allowance—of £3,000 for 2026-27. This means the first £3,000 of net gains you make in the tax year are tax-free. Only gains above this threshold are taxed.

The AEA has fallen dramatically in recent years: it was £12,300 in 2022-23, then halved to £6,000 in 2023-24, and halved again to £3,000 from 2024-25 onwards. This means far more investors now face a CGT bill on share sales than in previous years.

Example: Tom sells shares in April 2026 and makes a gain of £8,000. He has no other gains or losses in the year. His taxable gain is £8,000 minus £3,000 AEA = £5,000. If Tom is a basic-rate taxpayer, he will pay 18% of £5,000 = £900 in CGT. If he's a higher-rate taxpayer, he pays 24% of £5,000 = £1,200.

How your income affects the CGT rate

The rate you pay depends on your total taxable income for the year. For 2026-27, the basic-rate band runs from £12,571 (just above the Personal Allowance of £12,570) to £50,270. If your income is below £50,270, you're a basic-rate taxpayer and pay 18% CGT on shares. If your income exceeds £50,270, you're a higher-rate taxpayer and pay 24%.

There's a wrinkle: if your income is close to the higher-rate threshold, your capital gain is added on top of your income to determine which rate applies. If the gain pushes you over the threshold, the portion of the gain that falls within the basic-rate band is taxed at 18%, and the portion above is taxed at 24%.

Example: Sarah earns £48,000 in salary (taxable income after Personal Allowance: £35,430). She sells shares and makes a £10,000 gain. After her £3,000 AEA, her taxable gain is £7,000. Her income uses up £35,430 of the basic-rate band (which ends at £37,700 of taxable income, i.e. £50,270 total income minus £12,570 PA). She has £37,700 – £35,430 = £2,270 of basic-rate band remaining. So £2,270 of her gain is taxed at 18% = £408.60, and the remaining £4,730 is taxed at 24% = £1,135.20. Total CGT: £1,543.80.

How to calculate your gain: the basics

The basic formula for a capital gain on shares is:

Gain = Disposal proceeds – Acquisition cost – Allowable costs

• Disposal proceeds: What you received when you sold the shares (the sale price).
• Acquisition cost: What you paid for the shares originally, including any purchase costs like broker commission or stamp duty.
• Allowable costs: Costs of buying and selling, such as broker fees, stamp duty reserve tax (SDRT), and professional advice fees directly related to the transaction.

Example: You bought 1,000 shares in XYZ plc for £5,000 plus £10 broker fee. You later sold them for £9,000 minus £15 broker fee. Your disposal proceeds are £9,000, your acquisition cost is £5,010, and your allowable disposal cost is £15. Gain = £9,000 – £5,010 – £15 = £3,975.

If you've held the shares for many years, you do not get any indexation allowance or taper relief—those were abolished for individuals years ago. Your gain is simply the cash profit, adjusted for allowable costs.

The share-matching rules: which shares did you sell?

If you've bought the same shares at different times and prices, HMRC needs a way to determine which shares you sold and therefore what acquisition cost to use. The UK uses a set of "matching rules" laid out in [TCGA 1992 s.104–s.110]. These rules match your disposal to acquisitions in a specific order:

1. Same-day rule: Shares sold are matched first with shares acquired on the same day.
2. Bed-and-breakfast rule (30-day rule): Next, shares are matched with shares acquired in the 30 days after the disposal (to prevent tax avoidance by selling and immediately repurchasing).
3. Section 104 pool: Finally, any remaining shares are matched against your "section 104 holding"—a pooled average cost of all shares of that class acquired before the disposal (excluding same-day and 30-day matches).

The section 104 pool explained

For most investors, the section 104 pool is the key concept. Every time you buy shares of the same class in the same company, you add them to the pool. The pool keeps a running total of the number of shares and the total cost. When you sell, you take shares out of the pool at the average cost.

Example: You buy 500 shares in ABC Ltd for £2,000 in January 2025. In June 2025, you buy another 300 shares for £1,500. Your section 104 pool now contains 800 shares with a total cost of £3,500 (average cost £4.375 per share). In July 2026, you sell 400 shares for £2,400. The acquisition cost for this disposal is 400 × £4.375 = £1,750. Your gain is £2,400 – £1,750 = £650. The pool now contains 400 shares with a cost of £1,750.

The pool adjusts automatically for corporate actions like bonus issues, rights issues, and takeovers, following specific HMRC rules [CG51700 onwards in the Capital Gains Manual].

Same-day and bed-and-breakfast matching

The same-day rule is straightforward: if you buy and sell shares on the same day, those transactions are matched together.

The 30-day rule is designed to stop "bed-and-breakfasting"—selling shares to crystallise a loss (or use your AEA) and buying them back the next day. If you sell shares and buy the same shares within the next 30 days, the sale is matched to the later purchase, not your original holding. This can produce unexpected results.

Example: You hold 1,000 shares in DEF plc in your section 104 pool with an average cost of £3 each. You sell all 1,000 for £5 each on 10 April 2026, expecting a gain of £2,000. But on 15 April, you buy 1,000 DEF shares again for £5.10 each. The 30-day rule matches your 10 April sale to your 15 April purchase. Your gain on 10 April is now £5.00 – £5.10 = –£0.10 per share, a loss of £100. The new shares go into your pool at £5.10 each. This rule can turn an expected gain into a loss (or vice versa), so be careful with timing.

Losses: how to use them

If you sell shares at a loss, that loss can be offset against gains in the same tax year, reducing your taxable gains. If your losses exceed your gains, the net loss can be carried forward indefinitely to use against future gains.

You must report losses to HMRC if you want to use them in future years, even if you have no tax to pay in the year of the loss. Losses are set against gains before you deduct the Annual Exempt Amount.

Example: In 2026-27, you make a £10,000 gain on one share sale and a £4,000 loss on another. Your net gain is £6,000. You then deduct your £3,000 AEA, leaving £3,000 taxable. If you had no loss, your taxable gain would have been £10,000 – £3,000 = £7,000, so the loss saved you tax on £4,000.

Losses brought forward from earlier years are used only to the extent needed to bring your gains down to the AEA. You don't have to use all your losses if doing so would waste your AEA.

Example: You have £20,000 of losses brought forward. In 2026-27, you make a £5,000 gain. You use £2,000 of losses to reduce the gain to £3,000, which is covered by your AEA. The remaining £18,000 of losses carry forward to next year. You don't waste your AEA by over-using losses.

Employee share schemes: special rules

Many employees receive shares through company share schemes. The tax treatment depends on the type of scheme:

• Share Incentive Plans (SIPs): Shares acquired through a SIP and held in the plan for five years are exempt from CGT when you sell them.
• Save As You Earn (SAYE) / Sharesave: Shares acquired by exercising SAYE options are exempt from CGT on the gain up to exercise, but any gain after you take the shares out of the scheme is taxable.
• Company Share Option Plans (CSOP): No income tax or National Insurance on exercise if conditions met, but CGT applies on eventual sale. Acquisition cost is the amount you paid to exercise the option.
• Enterprise Management Incentives (EMI): Favourable income tax treatment on exercise, and if you hold the shares for at least two years after grant (and meet other conditions), you may qualify for Business Asset Disposal Relief (formerly Entrepreneurs' Relief), which is a 10% CGT rate on gains up to a lifetime limit—though this is a separate relief not covered in detail here.

If you've received shares through work, check the specific scheme rules. Often the company will provide guidance, but the tax can be complex [see Employment Income Manual EIM40000 onwards for share schemes].

Reporting and paying CGT on shares

If your total gains for the year (before deducting losses and the AEA) exceed £50,000, or your taxable gains (after losses and AEA) are above the £3,000 threshold, you must report them to HMRC. You do this by completing a Self Assessment tax return, specifically the SA108 Capital Gains summary pages.

Even if you don't normally complete a tax return (for example, if you're an employee with income fully taxed at source), you must register for Self Assessment and file a return if you have taxable gains. The deadline for online filing is 31 January following the end of the tax year (so 31 January 2028 for the 2026-27 tax year). Any CGT due is also payable by this date.

For disposals of UK residential property, there's a separate 60-day reporting requirement, but this does not apply to shares. Shares are reported on the normal Self Assessment cycle.

Keep records of all your share transactions: contract notes, dividend statements, records of costs. HMRC can enquire into your return for up to 12 months after you file it (longer if they suspect careless or deliberate errors), so good record-keeping is essential.

Common mistakes

Forgetting the 30-day rule: Many investors sell shares to use their Annual Exempt Amount or crystallise a loss, then buy back the same shares a few days later, not realising the bed-and-breakfast rule will match the sale to the new purchase and potentially wipe out the expected tax benefit.

Not claiming losses: If you make a loss, you must tell HMRC (usually via your tax return) to preserve the loss for future use. Losses not reported within four years of the end of the tax year are lost forever.

Assuming the old £12,300 allowance still applies: The Annual Exempt Amount has fallen sharply. Many people still think they have over £12,000 tax-free, but it's only £3,000 now. This catches out casual investors who sell a modest holding and are surprised by a tax bill.

Ignoring ISA and pension wrappers: Gains on shares in an ISA or SIPP are completely tax-free. If you're investing new money, using your ISA allowance (£20,000 for 2026-27) first can save significant CGT in future.

Mixing up income tax and CGT: Dividends from shares are subject to income tax (with a £500 dividend allowance for 2026-27), not CGT. CGT applies only when you sell the shares themselves. Don't confuse the two.

Not keeping records: HMRC expects you to keep records for at least five years after the 31 January filing deadline. If you can't prove your acquisition cost, HMRC may substitute a lower figure, increasing your taxable gain.

Strategies to reduce CGT on shares

While tax should never be the only driver of investment decisions, there are legitimate ways to manage your CGT liability:

• Use your Annual Exempt Amount every year: If you have gains, consider selling enough shares each year to use your £3,000 allowance, then reinvest if you wish (being mindful of the 30-day rule). This "bed-and-ISA" strategy—selling shares and rebuying in an ISA—can be effective.
• Offset gains with losses: If you have losing positions, consider selling them in the same tax year as your gains to reduce your taxable amount.
• Transfer shares to your spouse or civil partner: Transfers between spouses/civil partners are exempt from CGT [TCGA 1992 s.58]. If your spouse is a basic-rate taxpayer and you're higher-rate, transferring shares to them before sale can cut the CGT rate from 24% to 18%. (The recipient takes over your acquisition cost, so the gain is the same, but the rate is lower.)
• Spread disposals across tax years: If you have a large gain, consider selling in tranches over two or more tax years to use multiple years' AEA.
• Maximise ISA contributions: New investments should go into an ISA where possible. Over time, this shelters more of your portfolio from CGT.

Always take care that any planning is genuine and not artificial. HMRC has anti-avoidance rules, and aggressive schemes can backfire.

What to do next

If you've sold shares in the 2026-27 tax year and made a gain above £3,000 (or any gain if your total proceeds exceed £50,000), you'll need to report it to HMRC. Start by gathering your contract notes and calculating your gain using the matching rules and section 104 pool.

For specific questions about your situation—such as "How do I calculate my section 104 pool?" or "Do I need to report this