How to Calculate Capital Gains Tax on Shares
- MAZ
- 4 days ago
- 23 min read
Index:
Capital Gains Tax on Shares in the UK: What It Is and Who Needs to Pay in 2025
Step-by-Step Guide to Calculating Capital Gains on Shares in the UK (2025 Rules)
How and When to Report and Pay Capital Gains Tax on Shares in the UK
Capital Gains Tax Planning Strategies for Shares in the UK – Reduce, Delay or Eliminate CGT Legally
Advanced Capital Gains Tax Scenarios on Shares in the UK – What Most Taxpayers Overlook
The Audio Summary of the Key Points of the Article:
Capital Gains Tax on Shares in the UK: What It Is and Who Needs to Pay in 2025
Short answer upfront: To calculate Capital Gains Tax (CGT) on shares in the UK in 2025, you subtract the original cost (plus allowable expenses) from the selling price of the shares. If your net gain exceeds the £3,000 annual tax-free allowance, you’ll owe CGT at either 10% or 20% depending on your total income. But hey, don’t sweat it—we’re breaking it down for you step by step in this complete guide!
What Is Capital Gains Tax and When Does It Apply to Shares?
Capital Gains Tax is a tax on the profit (the “gain”) you make when you sell, give away, or otherwise dispose of certain assets—including shares. In essence, it’s not the sale price that’s taxed, but the increase in value since you acquired the shares.
When you might owe CGT on shares:
You may owe CGT if you:
Sold shares at a higher price than you paid
Gave away shares (except to your spouse or civil partner)
Swapped shares
Got compensation (e.g., insurance payout) for lost or destroyed shares
You won’t owe CGT on:
Shares in an ISA or PEP
UK government gilts
Premium Bonds
NS&I certificates
For official guidance, see HMRC's overview on Capital Gains Tax.
Personal Allowance and Tax-Free Gains for 2024/2025
Let’s talk numbers. Your Capital Gains Tax-free allowance for 2024/25 is just £3,000, down from £6,000 in the previous tax year. This means you can make £3,000 in capital gains before paying a penny in tax.
Tax Year | Annual CGT Allowance |
2023/24 | £6,000 |
2024/25 | £3,000 |
2025/26 (expected) | £3,000 (unchanged unless revised) |
If your total gains across all assets in a tax year exceed this allowance, the surplus becomes taxable.
Capital Gains Tax Rates on Shares in 2025
The tax rate on your gains depends on your overall income, not just the gain itself. You’ll pay:
10% if you're a basic-rate taxpayer
20% if you're a higher or additional-rate taxpayer
Note: These rates apply to shares and other investments. For residential property, the CGT rates are higher (18% and 28%).
Let’s break it down:
Tax Band (Income) | CGT on Shares |
Basic Rate (Up to £50,270) | 10% |
Higher Rate (£50,271 - £125,140) | 20% |
Additional Rate (Over £125,140) | 20% |
You can check your income tax band here: GOV.UK - Check income tax
How to Know If You Need to Report or Pay CGT
You must report CGT if:
Your gains exceed £3,000 in the tax year
The total sale value (not profit) exceeds 4× the allowance (£12,000 in 2024/25)
You have gains and also want to claim a capital loss
You’ve used up your CGT allowance on other gains
You don’t need to report if:
Your total gains are below the £3,000 threshold and
The total sale value is under £12,000
Real-Life Example: CGT Calculation for a UK Taxpayer
Let’s walk through a 2025 example using real numbers.
Example:
Imogen Wadsworth, a self-employed designer from Norwich, sold shares worth £40,000 in March 2025.
She bought them for £25,000 in 2021.
She paid £500 in broker fees and £250 in Stamp Duty Reserve Tax.
Step-by-step calculation:
Gain = Sale Price (£40,000) – Purchase Price (£25,000) = £15,000
Allowable costs = £500 + £250 = £750
Net Gain = £15,000 – £750 = £14,250
Tax-Free Allowance = £3,000
Taxable Gain = £14,250 – £3,000 = £11,250
Imogen’s annual income is £52,000, placing her in the higher rate band. So she pays 20% CGT.
CGT Due = 20% × £11,250 = £2,250
Emergency Tax, Overpayments & Refunds: What if You're Overtaxed?
HMRC systems can sometimes apply emergency tax codes or miscalculate CGT if your earnings fluctuate, or you have multiple sources of income. In these cases, CGT could be calculated incorrectly—especially if you're self-employed or receive bonuses.
But don’t panic—overpaid CGT can be reclaimed via HMRC's online self-assessment portal or through an amended CGT return. This is where proper record-keeping and timely reporting help!
Real-life example:
Douglas Caruthers, a senior contractor, sold shares in May 2024, reported promptly, but later realised he had overpaid due to incorrectly calculating the purchase value.
By filing an amended CGT report online, Douglas recovered £1,100 in overpaid tax in under 4 weeks.
Allowable Deductions and Reliefs for 2025
When calculating CGT on shares, deductible costs include:
Stockbroker fees (buying and selling)
Stamp Duty Reserve Tax
Transfer fees
Legal or valuation costs directly tied to the share transaction
You can also apply reliefs:
Gift Hold-Over Relief (when gifting to others in business scenarios)
Enterprise Investment Scheme (EIS) Relief (defer CGT on other gains)
Negligible Value Claims (if shares become worthless)
Case Study: How Tax Relief Helped Reduce CGT Liability
Beatrix Ellington, a Bristol-based biotech founder, sold EIS-qualifying shares in early 2025. She made a gain of £25,000. Thanks to EIS deferral relief, she deferred her entire CGT liability to a future date.
That’s a savvy move if you're investing in startups or reinvesting gains strategically.
Don’t Ignore Losses – They Can Reduce Future CGT
If your shares plummet in value, you might feel like walking away—but wait. Declare the loss, and you can offset it against future capital gains.
Losses must be:
Reported to HMRC
Within 4 years of the end of the tax year in which they occurred
Example:
Nigel Hepworth, an investor from Leeds, declared a £10,000 loss on failed AIM-listed shares in 2024.
In 2025, he sold other shares at a £15,000 gain.
His net taxable gain was just £5,000.
UK Capital Gains Tax on Shares: Interactive Dashboard 2020-2025
Step-by-Step Guide to Calculating Capital Gains on Shares in the UK (2025 Rules)
How to Calculate Capital Gains on Shares in the UK: The Basics
If you’ve sold shares in the UK, your capital gain is generally calculated as:
Capital Gain = Sale Price – (Purchase Price + Allowable Costs)
Sounds simple, right? But hang on—real-life share ownership can get messy. You might have bought shares at different times and prices, received them through inheritance or an employer, or even held shares in a company that merged or got taken over. Let’s break all of that down.
Step 1: Establish the Sale Price (Disposal Proceeds)
This is what you received when you sold the shares, or their market value if:
You gifted the shares (except to your spouse or civil partner)
You sold them at undervalue
You inherited the shares and don't know the original price
📝 Pro Tip: Use official share price data from the London Stock Exchange or other trusted providers to determine market value. HMRC accepts these as valid sources.
Step 2: Identify the Acquisition Cost
This includes:
The price you paid for the shares
Any broker fees, stamp duty, or transaction costs at purchase
Any adjustments for corporate actions (e.g., mergers, rights issues)
If the shares were gifted, inherited, or received through an employer, use:
Market value at date of gift (unless from spouse or charity)
Probate value if inherited
Taxable value if acquired through an employee share scheme
Step 3: Apply the ‘Share Pooling’ Rule
In the UK, HMRC uses the share pooling method to simplify gains for shareholders who acquire shares of the same class in the same company at different times.
Here’s how it works:
All shares in the same company and class are grouped into a ‘Section 104 pool’. You calculate an average cost per share across all purchases.
Example: Share Pooling in Action
2020: Graham Bought 500 ABC plc shares @ £4 = £2,000
2022: Bought 300 more @ £6 = £1,800
Pool: 800 shares total; cost = £3,800 → average price = £4.75/share
In March 2025, Graham sells 300 shares at £8/share:
Sale proceeds = 300 × £8 = £2,400
Cost = 300 × £4.75 = £1,425
Gain = £975
❗ Important: Same-Day and 30-Day Matching Rules override pooling if you bought/sold shares of the same company on the same or nearby dates (more on this below).
Step 4: Adjust for Same-Day and 30-Day Rules (Bed and Breakfasting Rules)
To prevent tax avoidance through "bed and breakfasting" (selling shares and buying them back immediately), HMRC applies matching rules:
Same-day rule: Match shares sold with shares bought on the same day.
30-day rule: Match with shares bought within 30 days after the sale, in date order.
Only then do you revert to the Section 104 pool.
Example: Applying the 30-Day Rule
1 March 2025: Serena sells 200 XYZ shares
20 March 2025: Buys 100 XYZ shares again
➡️ The 100 repurchased shares must be matched with the sale. Only the remaining 100 will be pulled from the Section 104 pool.
Step 5: Deduct Allowable Costs
Allowable costs reduce your gain and include:
Stockbroker fees (buying and selling)
Stamp Duty Reserve Tax (0.5%)
Transfer or transaction fees
Specific legal and professional fees related to share disposal
📝 Tip: Keep digital and paper receipts to prove your deductions to HMRC if queried.
Step 6: Apply Reliefs (if eligible)
If you’re a business owner or investing in startups, CGT reliefs can slash or delay your tax bill:
Relief Type | Who It Helps | Benefit |
Business Asset Disposal Relief | Entrepreneurs & directors | 10% CGT rate (on lifetime gains up to £1m) |
Investor Relief | Long-term investors in unlisted shares | 10% CGT after 3 years |
EIS/SEIS Relief | Startup investors | CGT deferral or exemption |
Gift Hold-Over Relief | Business gifts | Defer CGT to recipient |
Step 7: Subtract Losses (Current or Previous Years)
You can offset share losses against gains in the same tax year or carry them forward to future years. Losses must be:
Claimed within 4 years
Recorded in your CGT report or tax return
If your shares became worthless, make a negligible value claim with HMRC to crystallise the loss.
Step-by-Step Guide to CGT on Shares
Real-Life Case Study: Share Gain with Pooling and Matching
Let’s look at a fully-fledged example involving pooling and the 30-day rule.
Scenario:
Lucinda Penrose, a mid-level analyst in Manchester, bought shares in “EcoInvest Ltd” at different times:
2019: 1,000 shares @ £1.50 = £1,500
2022: 500 shares @ £2.50 = £1,250
5 March 2025: Sells 800 shares @ £5 = £4,000
10 March 2025: Buys 300 shares @ £4
Calculation:
Same-day? No
30-day match? Yes → 300 of the 800 sold matched with this batch
Cost of 300 matched shares = 300 × £4 = £1,200
Remaining 500 pulled from pool → Total shares: 1,500; Cost: £2,750 → Avg = £1.83
Cost for 500 = 500 × £1.83 = £916.50
Total cost = £1,200 + £916.50 = £2,116.50Total proceeds = £4,000 → Gain = £1,883.50
Extra Scenarios to Watch Out For
Inherited Shares
Use the probate value (market value on date of death) as your acquisition cost.
Employer Share Schemes
Gains may already be taxed as income (e.g., via PAYE), so your CGT base cost is the market value at date of acquisition.
Shares Received in Takeovers
Check HMRC treatment—sometimes you “roll over” shares, other times you receive cash. This affects your gain calculation.
Tips for Getting It Right (and Staying Out of Trouble)
Use HMRC’s CGT calculator if your situation is straightforwardCalculate Capital Gains Tax
Always check if matching rules apply before using pooled costs
Document everything: acquisition dates, amounts, prices, fees, and adjustments
Use tax software or a professional if you’re dealing with multiple sales or complex structures
UK Capital Gains Tax on Shares: Trends and Insights (2020-2025)
How and When to Report and Pay Capital Gains Tax on Shares in the UK (2025 Guide)
When Do You Need to Report Capital Gains on Shares?
Whether you’re a seasoned trader or a casual investor offloading your old Tesco shares, the rules are the same: you must report capital gains if:
Your total gains (across all assets) exceed the £3,000 CGT allowance for the 2024/25 tax year
The proceeds from your share sales are over £12,000, even if your gain is small or nil
You want to claim a capital loss to carry forward to future years
You’ve received reliefs (like EIS or Gift Hold-Over Relief)
If none of these apply, and your total gains and proceeds are below thresholds, you don’t need to report.
🔗 Official rule: GOV.UK – Capital Gains Tax Reporting Thresholds
How to Report Capital Gains Tax on Shares (2025 Process)
There are two ways to report CGT to HMRC, depending on your situation:
Option 1: Self Assessment Tax Return
If you already file a Self Assessment tax return (e.g., you're self-employed or a landlord), simply include your CGT details in the Capital Gains Summary (SA108) section.
📝 You’ll need:
Dates of purchase and sale
Acquisition and disposal prices
Allowable costs (e.g. broker fees)
Any reliefs or losses applied
Option 2: Real-Time Capital Gains Tax Service
If you don’t use Self Assessment and just want to report a one-off share sale:
Go to: Report Capital Gains Tax on UK Assets
Create a Capital Gains Tax on UK assets account
Enter your details, upload documents (PDFs or images of contracts, brokerage statements)
Review the calculation
Pay securely online
It’s surprisingly smooth!
When to Report and Pay CGT on Shares
Here’s where people trip up: deadlines vary depending on how you report.
Method | Reporting Deadline | Payment Deadline |
Self Assessment | 31 January 2026 (for 2024/25 tax year) | 31 January 2026 |
CGT Real-Time Service | Within 60 days of sale | Same day as submission |
🕒 Tip: Don’t leave it to the last minute—late filing incurs penalties starting at £100, plus interest on unpaid tax.
PAYE and Emergency Tax: How CGT Interacts with Your Payroll
Here’s where things get weird—HMRC doesn’t collect CGT via PAYE. But CGT can affect your tax code if:
You underpaid CGT in previous years
You received shares from an employer under a tax-advantaged scheme (like SAYE or CSOP)
Let’s say:
You sold £15,000 worth of shares acquired via a discounted employer scheme
The income element (discount) may be taxed under PAYE, but your capital gain still needs reporting separately
If your code changes or you see emergency deductions on your payslip, check your tax code online: ➡️ Check Your Income Tax Code
What Happens If You Overpay CGT or Get It Wrong?
Hey, we’ve all been there—you panic during tax season and guess a number. Or maybe your broker didn’t provide clear cost data. Good news: CGT overpayments can be corrected.
You can amend your CGT return:
Up to 12 months after 31 January following the end of the tax year (so, for 2024/25, you have until 31 January 2027)
By logging into your Capital Gains Tax account or re-submitting SA108 via Self Assessment
Refunds are usually processed within 4–6 weeks, especially if your bank details are up to date with HMRC.
Real-World Case Study: PAYE Miscalculation and Refund
Let’s look at how this plays out for an actual taxpayer.
Case:
Clive Montague, a civil engineer from Nottingham, exercised shares from an old employer’s share scheme in June 2024. He sold them immediately, making a tidy £12,000 gain. But his employer incorrectly taxed the full amount under PAYE.
Result? Clive overpaid by £1,800.
Using HMRC’s CGT Real-Time Service, he corrected the acquisition value (which was below market value due to the scheme rules) and received a full refund within 28 days.
Moral: Check everything—don’t assume PAYE handles your CGT.
Penalties and Fines for Late or Inaccurate Reporting
You can face stiff penalties if you:
Miss the CGT reporting deadline
Understate your gains
Fail to pay on time
Here’s how penalties stack up:
Delay or Error | Penalty |
Miss deadline | £100 immediately |
3 months late | Daily penalties of £10/day (up to £900) |
6 months late | £300 or 5% of CGT owed |
Deliberate error | Up to 100% of the unpaid tax |
🛡️ Best defence: Use HMRC’s calculator or a qualified accountant—and keep records for at least 5 years after the 31 January deadline.
What If HMRC Gets It Wrong? Disputing CGT Errors
Sometimes, the issue isn’t on your end. You might:
See unexpected tax code changes
Be sent a CGT bill you don’t agree with
Find that HMRC didn’t process your CGT relief
In these cases:
Contact HMRC CGT helpline immediately
Use your CGT account to upload clarification documents (broker letters, transaction logs)
Lodge a formal complaint or appeal the decision
More info: How to Appeal a Tax Decision
Essential Checklist for Smooth Reporting
✅ Sale and purchase dates
✅ Prices (in GBP)
✅ Broker statements
✅ Any employer correspondence (for schemes)
✅ Relief certificates (EIS/SEIS/etc.)
✅ Receipts for allowable costs
✅ Losses or negligible value claims
✅ HMRC login or Gov Gateway ID
Essential Checklist for Smooth Reporting
Capital Gains Tax Planning Strategies for Shares in the UK – Reduce, Delay or Eliminate CGT Legally
Why Planning Ahead for Capital Gains Tax Is Crucial
If you’re selling shares—whether a one-off or part of your business exit strategy—planning CGT ahead of time can save you thousands.
CGT isn’t a tax you just “deal with later.” Once you’ve sold shares, the gain is crystallised. No going back. But with just a little foresight, you can halve your tax, or even eliminate it altogether.
Let’s look at the smartest CGT planning moves you can make in 2025, including timing sales, splitting ownership, using reliefs, and offsetting losses strategically.
Timing Is Everything: Split Disposals Across Tax Years
The most effective CGT strategy? Don’t trigger too much gain in one year.
Let’s say you plan to sell £80,000 worth of shares. Rather than doing it all in one go, consider:
Selling half in March 2025 (end of 2024/25 tax year)
Selling the other half in April 2025 (start of 2025/26)
This way, you get two CGT allowances of £3,000 = £6,000 tax-free.
Example:
Ewan Tredwell, a dentist in Sheffield, owns 1,000 shares in a listed firm. They’re up £20,000 in value.By splitting the sale across 5 April and 6 April 2025, he uses two CGT allowances, cutting £600 off his tax bill (20% × £3,000).
Gifting Shares to a Spouse or Civil Partner
HMRC allows you to transfer assets between spouses or civil partners without triggering CGT.
This isn’t just about love—it’s about tax planning.
By transferring shares to a lower-earning spouse:
You double the CGT allowance (£6,000 combined)
You may lower the tax rate (10% instead of 20%)
Real Case: Spousal Transfer in Action
Olivia and Marcus Fairburn, a married couple in York, own shares worth £60,000, bought for £30,000.They split ownership evenly before selling in June 2025:
Olivia’s income is £28,000 → 10% CGT rate
Marcus earns £85,000 → 20% CGT rate
By gifting half to Olivia, they cut their tax bill by £1,200
🧠 Note: You must genuinely transfer ownership—not just name-only—to qualify for spousal exemption.
Offsetting Losses: Don’t Let Old Investments Go to Waste
If you’ve had dud investments in the past, don’t forget them now.
You can offset:
Current year losses against current gains
Unused historic losses from up to four years back
And if you’ve got investments that have tanked (hello, crypto or AIM stocks), consider a negligible value claim.
This lets you declare them as worthless and crystallise a loss, even if you haven’t technically sold them.
Example: Loss Offset in Practice
Yvette Strangeways, a freelance illustrator from Bath, made a £9,000 gain in March 2025.But she also held £5,000 worth of now-worthless biotech shares.
She filed a negligible value claim → HMRC approved → Net gain becomes £4,000 → Taxable gain just £1,000 after the allowance.
Maximise CGT Reliefs You May Qualify For
HMRC offers generous reliefs if you meet certain criteria. Don’t miss them.
Relief | Who It Helps | CGT Benefit |
Business Asset Disposal Relief (BADR) | Business owners selling shares in their company | CGT cut to 10% on first £1M |
Investors’ Relief | Investors in unlisted trading companies (held ≥3 years) | 10% CGT rate |
EIS / SEIS | Startup backers | Full exemption or deferral of CGT |
💼 For business sellers, BADR is often the single biggest CGT win—but it has strict conditions. Make sure you’ve been an officer/shareholder for at least 2 years.
Avoiding CGT Traps: Common Mistakes Taxpayers Make
Let’s talk about what not to do.
1. Selling shares just before tax year end without realising you’ve maxed your allowance
Always track your total disposals, not just individual gains.
2. Assuming shares in ISAs or pensions are taxed
They’re not—any gains inside ISAs or pensions are completely exempt from CGT.
3. Ignoring small acquisitions—every cost adds up
Transaction fees, stamp duty, and advisory fees can all be deducted.
4. Not using losses from prior years
If you’ve got old SA returns showing losses, dig them out and apply them.
Tax-Efficient Share Disposal Strategies for Business Owners
If you're a director, founder, or long-term shareholder in your own company, there are bespoke CGT strategies for you.
1. Pre-sale gifting to spouse
See earlier—but especially powerful when exiting a business.
2. Liquidate company via Members’ Voluntary Liquidation (MVL)
You may qualify for BADR and pay just 10% tax.
3. Defer gain with EIS reinvestment
Invest gain into qualifying EIS shares within 12 months to delay CGT until disposal of new shares.
Real Case: Business Owner Exit with BADR
Harrison McVey, a tech entrepreneur in Glasgow, sells his shares for £800,000 in January 2025.
He qualifies for BADR, having been a director and 5%+ shareholder for 3 years.
Instead of £160,000 CGT at 20%, he pays just £80,000 (10%), saving £80k legally.
Charitable Giving and CGT: Double the Benefit
You can gift shares to a registered UK charity and:
Avoid Capital Gains Tax altogether
Claim Income Tax relief on the market value
It’s a brilliant win-win if you’re philanthropically inclined.
🔗 See HMRC’s guidance: GOV.UK – Tax relief when you donate shares
Holding Shares Until Death: No CGT Due
In some cases, doing nothing is the smartest move.
If shares are held until death:
No CGT is due by the deceased
Beneficiaries inherit at market value on date of death (known as “step-up” basis)
This is useful in estate planning—especially if CGT would outweigh inheritance tax planning benefits.
Using Investment Wrappers to Avoid CGT Altogether
Sometimes, the best CGT strategy is to avoid it entirely through tax shelters.
Use:
Stocks & Shares ISAs (limit = £20,000/year) – No CGT or income tax
Self-Invested Personal Pensions (SIPPs) – No CGT or income tax inside the wrapper
Offshore Bonds (for high-net-worth individuals)
If you’re actively investing, prioritise ISAs first—they’re free from both CGT and dividend tax.
Here’s a lightning checklist of CGT strategies:
✅ Use both CGT allowances (split disposals across tax years)
✅ Transfer shares to a spouse to reduce rate or double allowance
✅ Offset old or negligible value losses
✅ Time your sale to avoid PAYE threshold jumps
✅ Use BADR, Investors’ Relief or EIS where eligible
✅ Shelter gains in ISAs and pensions
✅ Hold until death or gift to charity for total exemption
Lightning Checklist of Capital Gains Tax (CGT) Strategies
Advanced Capital Gains Tax Scenarios on Shares in the UK – What Most Taxpayers (and HMRC!) Overlook
Employer Share Schemes: Where CGT and Income Tax Collide
If you’ve received shares from work—say through an SAYE, SIP, CSOP, or EMI scheme—you might assume HMRC has taken care of the tax side. But that’s not always true.
Here’s how it works:
Discounted shares or options often get taxed under PAYE (as income)
Any growth above that amount is subject to Capital Gains Tax once sold
And here's the kicker: many employees forget to calculate the CGT because the shares were “already taxed.” But if they rose in value post-acquisition, you may owe CGT on the gain from that point onward.
Real Example: EMI Scheme Misunderstanding
Jonty Featherstone, a design engineer in Derby, was granted 5,000 EMI share options in 2020 at £1 each. In 2024, he exercised and sold them for £4. HMRC taxed £3 per share via PAYE.
But in reality, only £2.50 should’ve been taxed because of the scheme’s structure. The rest was capital gain, and Jonty overpaid income tax by £2,500.
After submitting an amended CGT calculation and a refund claim to HMRC, the balance was corrected in 6 weeks.
Selling Foreign Shares: The UK Still Wants a Piece
Many UK taxpayers don’t realise that CGT applies globally if you’re UK tax resident.
Key rules for foreign shares:
Declare all gains, even from overseas platforms (e.g., E*TRADE, Robinhood)
Convert acquisition and sale amounts into GBP using HMRC’s average exchange rate (or spot rate on the day)
You may be able to claim foreign tax credits if you paid CGT abroad
ℹ️ HMRC checks international trading platforms—don’t skip these disclosures.
Case Study: Non-UK Platform, UK Tax Due
Camilla Horrocks, a digital nomad based in Brighton, sold her Tesla shares (held via a US brokerage) for a £12,000 gain in November 2024. She had no idea UK CGT applied, and didn’t report the sale.
HMRC flagged it during a random check of foreign platform integrations. She was fined £300 for late disclosure—but claimed a US tax credit for the 15% withholding tax deducted by her broker.
Dual-Income Households: Why CGT Can Unintentionally Push You Up a Bracket
Capital gains are not counted as “income” for income tax, but they can affect your tax band when calculating CGT.
Here’s why:
Your total taxable income + gains is what determines whether you pay 10% or 20% CGT
So if your income is just under the higher-rate threshold, a gain could tip you over
Example:
Nicolette and Rufus, both employed and earning £49,000 each, jointly sold shares worth a £10,000 gain in 2025.
They thought they'd be taxed at 10%.
But since CGT sits on top of income, £7,730 of the gain pushed them above the £50,270 threshold—meaning £2,270 of the gain was taxed at 20%, not 10%.
A small detail, but a £227 difference in tax owed.
PAYE Misalignments and CGT Code Confusion
Sometimes HMRC gets confused when PAYE, share schemes, and CGT reports all clash.
This can lead to:
Emergency tax deductions
Incorrect CGT liabilities
Misreported income/gain split
To fix this, you may need to:
Log into your HMRC account and download your PAYE report
Manually separate what was taxed as income vs what should be CGT
Submit supporting docs (broker statements, employer emails, grant agreements)
🛡️ Always review your tax code annually:👉 Check Income Tax Code
Inheriting or Being Gifted Shares: Special CGT Considerations
If you inherit shares, you don’t pay CGT at that point.
Instead:
You inherit them at the probate value (market value on date of death)
CGT only applies when you later sell them—and the gain is from the probate value to sale value
But if you’re gifted shares (not from spouse or charity), you pay CGT based on their market value on date of transfer, even if no money changed hands.
Rare Scenario:
Frederick Bletchley, a solicitor in Oxford, gifted his daughter £30,000 in listed shares. She sold them shortly after at a £32,000 value.He had to report a £2,000 capital gain using market value—even though she didn’t pay him anything.
Shares Acquired Pre-1982: Indexed or Market-Value Rules
If you bought shares before 31 March 1982, you must use the market value on that date as your cost base.
You can find official 1982 share prices through specialist data providers or ask HMRC for help.
🎩 Fun fact: Many older Brits inherited these in the 80s from demutualisations like Abbey National, Halifax, or BP.
Investing via Funds and ETFs: When CGT Still Applies
Even though you're buying through platforms like Vanguard or Hargreaves Lansdown, selling ETF or fund units still triggers CGT (unless in an ISA).
✔️ UK-domiciled funds: You pay CGT on the gain
✔️ Offshore reporting funds: Also taxable under CGT rules
❌ Non-reporting offshore funds: Entire proceeds may be taxed as income, not capital gain—a harsh surprise
Always check the reporting status of any fund before investing.
Some situations simply go beyond DIY tax calculators. You should consider a tax adviser if:
You’re selling a business or large shareholding
You’re using EIS or SEIS reliefs
You’ve got historic unreported gains
You hold complex offshore shares or funds
You’re unsure what part of a share disposal was taxed via PAYE
Look for a Chartered Tax Adviser (CTA) or ACCA-qualified accountant with capital gains experience. Their fee can often save you more than it costs.
Final Checklist: Rare but Critical CGT Scenarios You Should Double-Check
✅ Shares from employer? Was income already taxed or CGT owed later?
✅ Used an overseas platform? Convert and declare properly.
✅ Sold jointly with spouse? Did you split gains and allowances?
✅ Tipped into higher rate band because of CGT? Recheck rate.
✅ Gifted shares? Use market value on gift date.
✅ Holding non-reporting funds? Could be taxed as income.
✅ Share code changed after merger? Apply correct cost base.
Navigating Complex CGT
Summary of All the Most Important Points Mentioned In the Above Article
You only pay CGT on the profit (gain) made from selling or disposing of shares, not the total sale amount.
The tax-free CGT allowance for 2024/25 is £3,000, and gains above this are taxed at 10% or 20%, depending on your income bracket.
To calculate your gain, subtract the original cost and allowable expenses (e.g., broker fees, SDRT) from the sale price.
HMRC uses share pooling and matching rules (same-day, 30-day, and Section 104 pool) to determine which shares were sold.
You must report CGT if your gains exceed £3,000, or if your total sale proceeds exceed £12,000 in the tax year.
CGT can be reported via Self Assessment or HMRC’s real-time reporting service, and tax is due by 31 January or within 60 days of sale, depending on the method.
Transferring shares to a spouse or civil partner allows you to double your CGT allowance and potentially lower your tax rate.
Losses—including negligible value claims—can be used to offset gains in the current or future years, reducing your tax bill.
Reliefs like Business Asset Disposal Relief, Investors’ Relief, and EIS can significantly reduce or defer CGT liability.
Special rules apply to employer share schemes, foreign shares, inherited assets, and non-reporting offshore funds, often requiring extra care to avoid unexpected tax bills.
FAQs
Q1. Can you offset capital gains on shares against personal income tax?
A. No, capital gains cannot be offset against income tax liabilities. CGT is separate from income tax, and gains can only be offset against allowable capital losses.
Q2. Do you pay Capital Gains Tax on dividends from shares?
A. No, dividends are taxed as income under dividend tax rules and are not subject to Capital Gains Tax.
Q3. Do shares held in a limited company attract Capital Gains Tax?
A. No, limited companies pay Corporation Tax on chargeable gains, not CGT. CGT applies only to individuals, trustees, and personal representatives.
Q4. Are Capital Gains on shares taxed differently in Scotland?
A. No, Capital Gains Tax is reserved to the UK government, so the rates and rules are the same across England, Wales, Scotland, and Northern Ireland.
Q5. Can you carry forward capital losses if you don’t report them in the same year?
A. Only if the loss is reported within 4 years of the end of the tax year in which it occurred, even if it’s not used immediately.
Q6. Can you transfer shares to adult children without paying Capital Gains Tax?
A. No, gifts to children are treated as disposals at market value and may trigger CGT unless within the allowance or exempt under specific reliefs.
Q7. How do you find the market value of unlisted shares for CGT purposes?
A. You must obtain a professional share valuation or use HMRC’s Shares and Assets Valuation (SAV) service to estimate the market value at the disposal date.
Q8. Can you pay Capital Gains Tax in instalments?
A. Not usually. However, if CGT is due on assets with deferred consideration (e.g., earnouts or loan notes), HMRC may allow staged payments.
Q9. Are shares inherited from abroad taxable under UK CGT rules?
A. Yes, if you are UK tax resident, foreign shares are subject to UK CGT when disposed of, using the probate value in GBP as the acquisition cost.
Q10. How does CGT work if you sell shares through a trust or are a trustee?
A. Trustees pay CGT at a flat rate of 20% above their annual exemption of £1,500 (half the individual allowance), with specific trust reporting rules applying.
Q11. Do ISA transfers affect your CGT position on shares?
A. No, transferring shares into or between ISAs does not trigger a CGT event, as all gains within an ISA wrapper are tax-free.
Q12. How is CGT calculated on shares received as part of a divorce settlement?
A. Transfers between spouses or civil partners are CGT-free until the end of the tax year of separation. After that, they may be treated as market value disposals.
Q13. Can you claim CGT relief on shares used to start a new business?
A. Yes, if reinvested in EIS-qualifying companies, gains may be deferred or exempt under the Enterprise Investment Scheme.
Q14. Do you pay CGT on demutualisation shares (e.g., Halifax, Northern Rock)?
A. Yes, but only on the gain above their market value at the time they were first allocated, typically zero cost if no payment was made.
Q15. What records do you need to keep for CGT on shares?
A. You must retain purchase and sale records, dates, costs, broker statements, valuations, and evidence of reliefs claimed for 5 years after the 31 January filing deadline.
Q16. Can you avoid CGT by gifting shares to a charity?
A. Yes, gifts of shares to registered UK charities are exempt from CGT and may also qualify for income tax relief.
Q17. How do rights issues or bonus shares affect your CGT calculation?
A. They adjust your original acquisition cost in the share pool, spreading your initial purchase price across more shares, thus lowering average cost per share.
Q18. Does Capital Gains Tax apply if you transfer shares between your own trading and investment accounts?
A. No CGT applies as long as the legal ownership remains with you personally; however, transferring between different legal entities can trigger a CGT event.
Q19. What happens to CGT liability if a shareholder dies before selling their shares?
A. No CGT is due on death. The shares are revalued at market value for the estate, and beneficiaries inherit them with a stepped-up base cost.
Q20. Are currency fluctuations considered in CGT when selling foreign shares?
A. Yes, gains must be calculated in GBP. If foreign currency was used, convert both acquisition and disposal prices using the correct exchange rate at each date.
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