Capital Gains Tax on Shares: Rates, Allowance and Legal Ways to Pay Less

Capital gains tax on shares is charged at 18% on gains that fall within your remaining basic-rate band and 24% above it, after the £3,000 annual exempt amount for 2026/27. There is no relief for holding shares longer: a share bought in 2010 and sold today is taxed exactly the same as one bought last month, because taper relief and indexation allowance were abolished for individuals in 2008.

The bill is driven by three things — how much of your basic-rate band is left, which shares HMRC treats as the ones you sold, and whether the shares sit inside a tax wrapper. Each of those can be managed legally.

Key points

• Gains above £3,000 are taxed at 18% or 24%, based on your income plus the gain.
• CGT rates and the basic-rate band are UK-wide — Scottish income tax bands do not change your CGT.
• The share identification ("matching") rules decide your cost, not your own choice of which shares to sell.
• Holding shares for 5, 10 or 20 years gives no CGT discount whatsoever.
• Bed-and-ISA, using both spouses' allowances and claiming losses are the main legitimate ways to pay less.

Rates and the £3,000 allowance

Your first £3,000 of net gains in the tax year is free of tax. The annual exempt amount cannot be carried forward — if you do not use it by 5 April, it is gone.

Above that, the rate depends on where the gain sits when stacked on top of your taxable income. Work out your taxable income first, see how much of the £37,700 basic-rate band is unused, and apply 18% up to that point and 24% on the rest.

Important for Scottish taxpayers: CGT is not devolved. Scottish rates and bands apply to non-savings income only, so even if you pay 42% Scottish higher-rate income tax, the band used for your CGT calculation is the UK £37,700 basic-rate band and your share gains are still taxed at 18% or 24%. There is more detail in the guide to capital gains tax rates for 2026/27.

Worked example

Rachel earns a £45,000 salary and sells shares in June 2026 for a £18,000 gain.

• Taxable income: £45,000 − £12,570 Personal Allowance = £32,430.
• Basic-rate band left: £37,700 − £32,430 = £5,270.
• Taxable gain: £18,000 − £3,000 = £15,000.
• First £5,270 at 18% = £948.60.
• Remaining £9,730 at 24% = £2,335.20.
• Total CGT: £3,283.80.

Note how the gain itself pushes most of the profit into the 24% band. Spreading a large disposal across two tax years can use two £3,000 allowances and two slices of basic-rate band — provided you are comfortable with the market risk of waiting. You can test the numbers with the capital gains tax calculator.

Share matching: which shares did you actually sell?

If you have bought the same shares at different prices over the years, you cannot pick the most expensive ones to sell. HMRC applies a fixed order of identification, and it is the single biggest source of error in DIY calculations.

1. The same-day rule

Disposals are matched first against any shares of the same class in the same company acquired on the same day.

2. The 30-day rule

Next, they are matched against acquisitions in the following 30 days. This is the anti-"bed-and-breakfasting" rule: selling to crystallise a gain or loss and buying straight back does not work, because the sale is matched to the repurchase rather than to your old, cheaper holding.

3. The Section 104 pool

Anything left is matched against the pool of all your earlier acquisitions, using the average cost per share.

Pooling example

Tom buys 1,000 shares at £4 (£4,000) in 2018 and 500 at £7 (£3,500) in 2022. His pool is 1,500 shares costing £7,500 — an average of £5 each. He sells 600 at £12 (£7,200).

• Cost of the 600 shares: 600 × £5 = £3,000.
• Gain: £7,200 − £3,000 = £4,200.

Now suppose he buys 200 shares back nine days later at £11.50. The 30-day rule matches 200 of the disposal to that repurchase:

• 200 shares: proceeds £2,400 − cost £2,300 = £100 gain.
• 400 shares from the pool: proceeds £4,800 − cost (400 × £5) £2,000 = £2,800 gain.
• Total gain £2,900, and his pool cost is unchanged for the shares he still holds.

The repurchase cut the current-year gain, but only by parking the untaxed profit in the pool for later. Where you have several buys and sells, the CGT share matching calculator applies the same-day, 30-day and pooling rules in the right order for you.

Holding shares for longer does not make them tax-free

There is a persistent myth — repeated on forums and in comment threads — that shares become exempt from capital gains tax once you have held them for five years, or that shares held 10 years escape tax. It is wrong. There is no minimum holding period and no sliding scale for shares held by an individual.

The myth has roots in rules that no longer exist:

• Indexation allowance used to uprate your cost for inflation. It was frozen for individuals in 1998 and withdrawn entirely in 2008.
• Taper relief reduced the chargeable proportion of a gain the longer you held an asset, with the biggest reductions for business assets. It was abolished from 6 April 2008 and replaced with a single flat structure.

Since then, the only thing time does is increase the gain. Two events do change the position, and neither is a holding-period rule:

• Death. There is no CGT on death, and the people who inherit are treated as acquiring the shares at their market value at the date of death, wiping out the accrued gain.
• Wrappers. Gains on shares held inside an ISA or a pension are simply outside the CGT net, from day one.

Two other cases are sometimes mistaken for a long-service discount. Enterprise Investment Scheme shares can be disposed of free of CGT if income tax relief was claimed and the shares are held for at least three years, and Business Asset Disposal Relief has a two-year qualifying period. Both are specific reliefs with strict conditions — they are not a general rule that patient investors get a discount.

Bed-and-ISA: moving shares into a tax-free wrapper

You cannot transfer shares you already own straight into an ISA. The standard workaround is to sell the shares in a taxable account and repurchase the same holding inside the ISA — a "bed-and-ISA". Because the ISA is a separate, non-chargeable entity, the 30-day rule does not defeat it in the way a simple sell-and-rebuy would.

What you get:

• The sale crystallises a gain now, which may fall entirely within your £3,000 annual exempt amount and cost nothing.
• All future growth and dividends inside the ISA are free of CGT and income tax, and never need reporting.
• Doing this every year gradually shelters a portfolio using allowances that would otherwise be wasted.

What it costs:

• The repurchase uses part of your £20,000 ISA subscription limit for the year.
• Dealing charges and the bid-offer spread apply, plus stamp duty reserve tax on the purchase of UK shares.
• You are briefly out of the market between the sale and the repurchase.
• If the gain exceeds the allowance, you pay CGT now to save it later.

The mechanics, timing and order of transactions are covered step by step in the guide to bed-and-ISA and using your CGT allowance.

Using a spouse or civil partner

Transfers of shares between spouses or civil partners who live together are made on a no gain, no loss basis. The receiving partner takes over the original cost, so nothing is taxed at the point of transfer.

That opens up two effects:

• Two allowances. A couple has £6,000 of annual exempt amount between them, not £3,000.
• The lower rate. If one partner has unused basic-rate band, gains realised by that partner are taxed at 18% rather than 24%.

Example

Priya has a £24,000 gain and is a higher-rate taxpayer with no basic-rate band left. On her own: (£24,000 − £3,000) × 24% = £5,040.

Instead she transfers half the holding to her husband, who has £10,000 of basic-rate band unused.

• Priya: (£12,000 − £3,000) × 24% = £2,160.
• Husband: £12,000 − £3,000 = £9,000 taxable, all within his spare band, at 18% = £1,620.
• Total £3,780 — a saving of £1,260.

The transfer must be a genuine, outright gift of beneficial ownership; you cannot hand the shares over on the understanding that the proceeds come straight back. The rule only applies to couples who are married or in a civil partnership and living together in the tax year, and it does not apply after separation in the way many people assume.

Employee shares

Shares from work follow the normal CGT rules once you own them, but the starting cost is often higher than people expect because income tax has already been charged on part of the value.

• With Share Incentive Plan and SAYE shares, the shares can be moved into an ISA shortly after they come out of the plan without triggering a gain, which removes all future CGT.
• With approved and unapproved options, the amount charged to income tax on exercise generally forms part of your base cost, so your taxable gain is only the growth after exercise.
• Selling a large tranche of employee shares in one tax year usually means most of the gain is taxed at 24%. Selling across tax years, or gifting part to a spouse first, uses more than one allowance.

Losses and reporting

Losses on shares are offset against gains in the same year automatically, and anything left over is carried forward indefinitely — but only if you have claimed it, normally within four years of the end of the tax year in which the loss arose. Carried-forward losses are used only to the extent needed to bring gains down to the annual exempt amount, so the allowance is not wasted.

Gains on shares are reported through Self Assessment (there is no 60-day filing requirement — that applies to UK residential property). You need to report if your taxable gains exceed the annual exempt amount, or if total proceeds exceed the reporting limit even where no tax is due. If you are not already in Self Assessment, HMRC's real time Capital Gains Tax service can be used instead.

What to do next

Work out the gain properly before you decide anything. Run your buys and sells through the CGT share matching calculator to get the right cost figure, then put that gain into the capital gains tax calculator alongside your income to see how much falls at 18% and how much at 24%. If the answer is uncomfortable, look at the bed-and-ISA guide and check whether a spouse has unused allowance and basic-rate band before 5 April.