Capital Gains Tax on Shares: Tax Rules When Selling Shares in 2026/27

Capital Gains Tax on shares applies when you sell shares or investments that have increased in value and the gain exceeds your available exemptions and allowances. Understanding how tax on selling shares works is important for investors because the amount of tax payable depends on your gain, income position, available losses and whether any exemptions apply.

Shares can be an effective way to build long-term wealth, but selling investments outside tax-efficient accounts can create a Capital Gains Tax liability. The rules around Selling shares Capital Gains Tax calculations have changed in recent years, including reductions to the annual exemption and changes to CGT rates.

For the 2026/27 tax year, individuals have a Capital Gains Tax Annual Exempt Amount of £3,000. This means the first £3,000 of total taxable gains made during the tax year may be free from CGT before applying the relevant tax rates. These rates sit alongside the wider Income Tax rules explained in our ultimate guide to personal tax in the UK.

This guide explains how Shares and Capital Gains Tax work, how to calculate gains, what costs can be deducted and how to report a share disposal tax liability to HMRC.

Tax When You Sell Shares: Quick Answer

Tax when you sell shares usually means Capital Gains Tax (CGT) on the profit you make when disposing of shares or investments outside a tax-exempt account such as an ISA. You do not pay CGT on the full sale proceeds; the calculation is based on your taxable gain after applying the relevant acquisition cost, allowable costs, capital losses, reliefs and available Annual Exempt Amount.

For 2026/27, the Annual Exempt Amount for most individuals is £3,000. Gains above the available allowance are generally taxed at 18% to the extent they fall within the unused basic-rate Income Tax band and 24% above that band.

When shares in the same company have been bought at different times, special share-identification rules can affect which acquisition cost is matched with the shares you sell. This means calculating tax on shares can be more complicated than simply subtracting the original purchase price from the sale price.

When Do You Pay Tax When You Sell Shares?

Do you pay Capital Gains Tax when selling shares?

You may need to pay Capital Gains Tax when you sell shares that have increased in value since you purchased them.

CGT is not charged on the full sale proceeds. Instead, it applies to the profit made after deducting allowable costs and available reliefs.

For example, if you buy shares for £20,000 and later sell them for £35,000, the starting point for your calculation is a £15,000 gain before considering any allowable costs, losses or exemptions.

You may need to consider Capital Gains Tax on shares where you:

• Sell shares in a company.
• Dispose of investment funds.
• Sell shares received through employee share schemes.
• Transfer certain investments.
• Dispose of shares held outside tax-efficient accounts.

However, not every share disposal creates a CGT liability. Some investments benefit from specific exemptions or tax advantages. A closer look at the circumstances where you don’t have to pay Capital Gains Tax at all can help clarify whether any of these apply to your particular disposal.

How Capital Gains Tax on shares works

When calculating CGT on shares, you need to determine the difference between the disposal value and the allowable cost of acquiring the shares.

The basic calculation is:

Sale proceeds – purchase cost – allowable expenses = capital gain

After calculating the gain, you then consider:

• Available capital losses.
• The Annual Exempt Amount.
• The applicable CGT rate.

For a wider explanation of CGT rates and allowances, see our guide on UK Capital Gains Tax rates and allowances.

Tax rates on selling shares in 2026/27

The CGT rates applying to shares and other taxable assets depend on your income position for the tax year.

Your capital gains are added on top of your taxable income when determining which CGT rate applies.

This means an individual with unused basic-rate Income Tax band may pay CGT at the lower rate on part of their gain, while any remaining gain may be taxed at the higher rate.

Recent Capital Gains Tax new rates introduced changes to the CGT treatment of many assets, bringing shares and other investments in line with residential property CGT rates.

How to calculate Capital Gains Tax on shares

Share Identification Rules: Which Shares Have You Sold?

Before calculating tax when you sell shares, you may need to determine which acquisition cost HMRC treats as belonging to the shares disposed of. This is particularly important where you have bought shares of the same class in the same company at different times.

For individuals, shares are generally matched in the following order:

1. Shares acquired on the same day as the disposal — the same-day rule.
2. Shares acquired during the 30 days following the disposal — commonly known as the 30-day or “bed and breakfast” rule.
3. Shares in your Section 104 holding — broadly, a pooled holding that uses the combined allowable cost of qualifying shares.

These rules can change the acquisition cost used in your CGT calculation, so you should not simply select whichever individual share purchase produces the lowest gain.

How the Section 104 Share Pool Works

Where the same class of shares in the same company has been acquired at different times, qualifying shares are generally combined into a Section 104 holding after applying the same-day and 30-day identification rules.

The pool keeps track of:

• the total number of shares in the holding; and
• the combined allowable acquisition cost of those shares.

When part of the pooled holding is sold, a proportion of the pool’s allowable cost is attributed to the shares disposed of. This means the CGT cost is generally based on the pooled average cost rather than the price of one particular historic purchase.

To calculate your Selling shares Capital Gains Tax liability, follow these steps:

Step 1: Calculate the gain on each share disposal

Once the correct shares and acquisition cost have been identified, the basic calculation is:

Sale proceeds − allowable acquisition cost − allowable disposal costs = capital gain or loss

Where the shares form part of a Section 104 holding, use the appropriate proportion of the pooled allowable cost rather than automatically using the price paid for a specific certificate or individual purchase.

For each disposal, calculate:

• The amount received from selling the shares.
• The original purchase cost.
• Any allowable buying or selling costs.

Step 2: Combine your gains and losses

If you sold multiple investments during the same tax year, combine all gains and losses to calculate your overall position.

Step 3: Apply allowances and reliefs

Deduct any available capital losses and then apply the Annual Exempt Amount where available. For a broader walkthrough covering other asset types too, our guide on working out capital gains sets out the same principles step by step.

Example: Calculating the Pooled Cost of Shares

Suppose you bought 100 shares for £800 and later bought another 100 shares of the same class in the same company for £1,200. Ignoring transaction costs, your Section 104 holding would contain 200 shares with a combined allowable cost of £2,000.

The average pooled cost would therefore be £10 per share. If you later sold 50 shares and no same-day or 30-day acquisition rules applied, £500 of the pooled acquisition cost would generally be attributed to the disposal.

If the 50 shares were sold for £900, the initial gain before considering allowable selling costs, losses, reliefs and the Annual Exempt Amount would be £400.

Allowable costs when selling shares

Certain costs can reduce the taxable gain when calculating tax on selling shares.

Allowable costs may include:

• Stockbroker fees.
• Transaction charges.
• Stamp Duty Reserve Tax paid when purchasing shares.
• Professional costs directly connected with the disposal.

You should keep supporting records for all costs claimed because HMRC may request evidence during a compliance check.

Shares held within an ISA and CGT

Shares held within a Stocks and Shares ISA are generally exempt from Capital Gains Tax.

This means:

• • Investment growth within the ISA is not normally subject to CGT.
  • Share disposals within the ISA do not usually create a CGT reporting requirement.
  • Future investment gains can benefit from tax-efficient treatment.

Using capital losses against share gains

If you sell shares at a loss, the loss may be available to reduce gains made on other investments.

For example, if you make a £25,000 gain from selling one group of shares but a £10,000 loss from another investment, your taxable gain may be reduced to £15,000 before applying the Annual Exempt Amount.

Understanding how to use Capital Gains Tax losses can help investors reduce future tax liabilities.

What Happens if You Sell and Buy the Same Shares Again?

If you sell shares and acquire shares of the same class in the same company within the following 30 days, the acquisition may be matched with the earlier disposal under the CGT share-identification rules.

This means that selling shares and quickly buying them back does not necessarily allow you to calculate the gain using the historic Section 104 pooled cost. The 30-day acquisition can take priority when determining the allowable cost of the shares sold.

There is also a same-day rule where shares are acquired on the same day as the disposal. These identification rules should be considered before calculating the gain or planning transactions around the end of the tax year.

When is Capital Gains Tax not payable on shares?

There are several situations where CGT may not be payable on shares.

This may include:

• Gains covered by the £3,000 Annual Exempt Amount.
• Shares held within an ISA.
• Disposals where available losses remove the taxable gain.
• Certain qualifying investments that benefit from specific reliefs.

Reporting and paying CGT on share sales

If you have taxable gains from selling shares, you may need to include them on your Self Assessment tax return.

The reporting process generally involves:

• Calculating the gain.
• Including details within your tax return where required.
• Paying the CGT due by the relevant deadline.

The rules covering how to report and pay Capital Gains Tax apply slightly differently depending on the asset sold, so it’s worth checking the process in more detail before your Self Assessment deadline.

For most share disposals, CGT is normally payable by 31 January following the end of the tax year in which the gain occurred.

Do You Need to Report Tax When You Sell Shares?

Whether you need to report a share disposal depends on your overall gains, losses, disposal proceeds, tax-return position and the reporting rules that apply to your circumstances.

Keep calculations showing the sale proceeds, acquisition or pooled cost, transaction fees, capital losses and any reliefs or exemptions used. Where several purchases and disposals of the same shares have taken place, your records should also support the share-identification calculation.

Common mistakes with share disposal tax

Common mistakes when dealing with Shares and Capital Gains Tax include:

• Using outdated CGT rates.
• Forgetting the reduced Annual Exempt Amount.
• Failing to include allowable transaction costs.
• Ignoring available capital losses.
• Assuming all investments are automatically tax-free.

Example: selling shares and calculating CGT

Emma purchases shares for £30,000 and later sells them for £55,000.

She pays £1,000 in allowable transaction costs.

The calculation is:

• Sale proceeds: £55,000.
• Less purchase cost: £30,000.
• Less allowable costs: £1,000.
• Capital gain: £24,000.
• Less Annual Exempt Amount: £3,000.
• Taxable gain: £21,000.

The final CGT liability depends on Emma’s income position and whether the gain falls within the basic-rate or higher-rate CGT band.

Key takeaways

Capital Gains Tax on shares applies when investments increase in value and are sold outside tax-efficient accounts. Understanding how gains are calculated, which costs can be deducted and which allowances apply helps investors manage their tax position effectively.

With the current reduction in the Annual Exempt Amount and updated CGT rates, reviewing investments before selling shares has become increasingly important.

By keeping accurate records, using available allowances and understanding share disposal tax rules, investors can ensure they meet HMRC requirements while making informed decisions.

Case Study: Planning Share Disposals to Reduce Unnecessary CGT Costs

Daniel visited our Farringdon office after deciding to sell a portfolio of shares held outside an ISA and wanted to understand his potential Capital Gains Tax on shares liability before completing the disposals. He was unsure how to calculate the gain, which investment costs could be deducted and whether using available allowances and losses could reduce the amount of tax payable.

During the consultation, we reviewed Daniel’s share purchase records, broker statements and planned sale transactions to prepare an accurate share disposal tax calculation. We explained how tax on selling shares is calculated by deducting the original purchase cost, allowable transaction costs and any available capital losses before applying the £3,000 Annual Exempt Amount for 2026/27. We also reviewed the difference between shares held within and outside an ISA, explained the current CGT rates and discussed the importance of reporting taxable gains correctly to HMRC.

Following the review, Daniel gained a clearer understanding of how Shares and Capital Gains Tax interact, identified the deductions and reliefs available to him and was able to make informed decisions about the timing of his share disposals while remaining compliant with HMRC requirements.