Capital Gains Tax on Shares: What You Pay and How to Reduce It

If you invest outside an ISA or pension, selling shares at a profit can trigger Capital Gains Tax — and with the annual allowance now just £3,000, more investors are affected than ever. Here’s what you pay and how to keep it down.

Do you pay CGT on shares?

You pay Capital Gains Tax when you sell shares for a profit above your annual allowance — but only on shares held outside a tax shelter. Shares inside an ISA or pension are completely exempt, which is exactly why those wrappers are so valuable.

So the first question is always: were the shares sheltered or not?

How much you pay

For 2025/26:

The first £3,000 of total gains is tax-free (the annual exempt amount)
Above that, gains are taxed at 18% within your basic-rate band and 24% above it

The gain stacks on your income to decide the rate. Note that dividends are taxed separately (under dividend tax) — CGT only bites when you sell. Our Capital Gains Tax calculator estimates the bill.

Working out the gain

Your gain is the sale proceeds minus the cost of the shares and dealing fees. The wrinkle: if you bought the same shares at different times and prices, HMRC’s share pooling and matching rules decide which “cost” applies. On larger or more active holdings this gets fiddly and is easy to get wrong.

How to reduce CGT on shares

Several legitimate moves can cut — or remove — the tax:

Use ISAs and pensions — gains inside them are tax-free
Use your £3,000 allowance every year (it can’t be carried forward)
Harvest losses — losses on other shares offset your gains
Spread disposals across tax years to use multiple annual allowances
Transfer to a spouse before selling, to use both allowances and bands
“Bed and ISA” — sell and rebuy inside an ISA to shelter future growth

We cover these and more in how to avoid Capital Gains Tax.

Get it right, especially on bigger holdings

The combination of a tiny £3,000 allowance and complex pooling rules means share-sale CGT is easy to miscalculate or overpay. Our Capital Gains Tax service handles the calculation correctly, claims your losses and allowances, and helps you plan disposals tax-efficiently. For the full picture, see Capital Gains Tax explained.

Frequently asked questions

Do I pay Capital Gains Tax on shares?

Yes, if you sell shares held outside a tax shelter for a profit above your annual exempt amount. For 2025/26 the first £3,000 of total gains is tax-free, then gains are taxed at 18% within your basic-rate band and 24% above it. Shares held inside an ISA or pension are exempt from Capital Gains Tax entirely.

How much Capital Gains Tax do I pay on shares?

After the £3,000 annual exempt amount, share gains are taxed at 18% if they fall within your basic-rate band and 24% above it for 2025/26. The rate depends on your total income, since the gain is added on top of it. Dividends are taxed separately under dividend tax rules — CGT only applies when you sell the shares.

How do I avoid Capital Gains Tax on shares?

Hold shares in an ISA or pension (gains are then tax-free), use your £3,000 annual exempt amount each year, harvest losses to offset gains, spread disposals across tax years to use multiple allowances, and consider transferring shares to a spouse to use both allowances. 'Bed and ISA' moves existing shares into an ISA to shelter future gains.

What is 'bed and ISA'?

'Bed and ISA' means selling shares you hold outside a tax shelter and immediately rebuying them inside an ISA. It can crystallise a gain now (using your annual allowance) and shelters all future growth and dividends from tax. It's a common year-end planning move, though dealing costs and the annual ISA limit apply.

How is the gain on shares calculated?

Your gain is the sale proceeds minus the cost of the shares and allowable dealing costs. Where you've bought the same shares at different times, special 'pooling' and matching rules apply to work out the cost — which can get complicated, so it's worth getting the calculation checked on larger holdings.

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Reviewed by Provense Accountants

Written and reviewed by our team of qualified accountants (AAT-regulated). This guide is general information, not personal tax advice — book a free consultation for advice on your situation.