How to calculate Capital Gains Tax on shares: Step-by-step UK guide

In practice, the calculation can be more detailed. You may need to consider transaction costs, shares bought at different prices, previous losses, your taxable income and whether the shares are held in a tax-efficient account such as an ISA.

This guide explains the main steps for UK taxpayers in general terms. Tax treatment depends on individual circumstances and may change. Check the latest HM Revenue & Customs (HMRC) guidance or speak to a qualified tax adviser before making tax-related decisions.

What is capital gains tax on shares?

CGT is a tax on the profit made when you sell or dispose of an asset that has increased in value. For shares, the taxable amount is usually the gain, not the full sale proceeds.

For example, if you bought shares for £5,000 and later sold them for £7,000, the starting point is a £2,000 gain before considering costs, losses or allowances.

A disposal can include selling shares, gifting them to someone other than a spouse or civil partner, or receiving compensation for them in certain situations. Some share transactions have special rules, so HMRC guidance should be checked where the facts are not straightforward.

When might you pay CGT on shares in the UK?

You may have to pay CGT if you make a gain when selling shares or other investments outside a tax-efficient wrapper. Shares held within an ISA are generally free from UK CGT, but this should not be confused with shares held in a standard trading or investing account.

You are not taxed simply because the market value of your shares rises while you still hold them. CGT usually becomes relevant when a gain is realised through a disposal.

You may also need to consider CGT when disposing of:

• Shares listed on a stock exchange

• Shares held through an investment platform outside an ISA

• Units in a fund or unit trust

• Employee share scheme shares

• Unlisted or overseas shares

Different rules can apply to employee shares, non-UK assets, inherited shares, gifts, investment clubs, mergers and takeovers. These situations may require professional tax advice.

Step-by-step: How to calculate capital gains tax on shares

The following steps show the general approach for a simple share sale. They are not a substitute for tax advice.

Step 1: Work out your sale proceeds

Start with the amount you received for the shares. This is often shown on your contract note or platform statement. Keep records of the sale date, number of shares sold, sale price and any charges.

Step 2: Find your original purchase cost

Next, identify what you paid for the shares. This may include the purchase price and certain costs directly linked to acquiring the shares, such as certain dealing or broker fees that qualify as incidental costs of acquisition. Keep purchase records, contract notes and any platform statements.

If you bought shares in the same company at different times and prices, do not assume that the shares sold are automatically matched to the first or last shares bought. Share identification and pooling rules may apply.

Step 3: Include allowable costs

Some costs may be taken into account when working out a gain, such as costs directly related to buying or selling the shares. The treatment of costs can depend on the circumstances, so investors should check HMRC guidance before filing.

Avoid including costs that are not allowable for CGT purposes. If in doubt, verify the position with HMRC or a qualified tax adviser.

Step 4: Calculate your gain or loss

The basic calculation is: Sale proceeds minus allowable cost equals gain or loss.

If the result is positive, you have a gain. If the result is negative, you may have an allowable loss. Losses can be useful because they may reduce taxable gains, subject to HMRC rules.

Step 5: Offset eligible losses

If you have made losses on other disposals, you may be able to use them to reduce your gains. Losses usually need to be recorded and may need to be claimed within HMRC time limits.

The rules around loss claims, negligible value claims and losses on certain shares can be complex. Check the latest HMRC guidance before relying on a loss.

Step 6: Deduct your annual CGT allowance

Individuals only pay CGT on overall gains above the tax-free allowance, known as the annual exempt amount. The annual exempt amount for individuals is £3,000 for the 2026/27 tax year.

This figure can change. Always confirm the current allowance for the relevant tax year before calculating tax due or completing a return.

Step 7: Apply the correct CGT rate

For shares, the CGT rate depends on your taxable income and how much of the gain falls within the basic rate band after deducting the annual exempt amount.

For the 2026/27 tax year, gains are taxed at 18% where they fall within the basic rate band and 24% where they fall above it. The main CGT rates increased from 10% and 20% to 18% and 24% for disposals on or after 30 October 2024.

The taxable gain may be split across more than one rate. For example, part of the gain might be taxed at 18% and the remainder at 24%, depending on the investor’s taxable income and the size of the gain.

Worked example: Calculating CGT on a share sale

This simplified example is for illustration only.

In this example, the taxable gain is £1,300. The CGT due would depend on the investor’s taxable income and the CGT rate that applies to the gain. If the whole taxable gain falls within the basic rate band, it may be taxed at 18%. If it falls above the basic rate band, it may be taxed at 24%.

Using those rates for illustration, CGT on a £1,300 taxable gain would be £234 at 18% or £312 at 24%. This is not a personalised calculation.

How share pooling affects your CGT calculation

Share pooling can matter when you have bought shares of the same class in the same company at different times and prices. HMRC’s guidance explains that shares of the same class in the same company are generally treated as a Section 104 holding. This means the cost is pooled and each share is treated as having the same average cost.

For example:

• You buy 100 shares at £2 each, costing £200.

• You later buy 200 shares at £3 each, costing £600.

• You now hold 300 shares with a total pooled cost of £800.

• The average cost is £2.67 per share, rounded here for simplicity.

If you then sell 150 shares, the cost used for those shares would usually be based on the average pooled cost, not simply the price paid for a specific earlier purchase.

There are special rules for same-day transactions and, subject to the applicable conditions, shares acquired within 30 days after a disposal. For example, HMRC’s 30-day matching rule has a UK-residence condition at the time of acquisition.

These rules can change the order in which shares are matched for CGT purposes. Check HMRC help sheet HS284 or seek professional advice where share purchases and sales are close together.

Shares held in an ISA or other tax-efficient account

Shares held inside an ISA are generally sheltered from UK CGT. This means gains made within an ISA are not usually subject to CGT and do not usually need to be included in a CGT calculation.

However, this does not apply to shares held outside an ISA in a standard dealing account. Investors should also distinguish CGT from dividend tax, which has separate rules.

Reporting and paying CGT on shares

Whether you need to report a share disposal depends on your gains, losses, total proceeds, whether you already complete a Self Assessment tax return and the rules for the relevant tax year.

Even if your gains are below the annual exempt amount, you may still need to report your disposals. For example, if you are required to complete Self Assessment, HMRC says you generally need to report chargeable disposals where the total proceeds exceed £50,000 for 2023/24 onwards.

HMRC provides CGT summary pages for Self Assessment and guidance for reporting gains. Keep records even if no tax is due, as they may be needed to support the calculation.

Useful records include:

• Contract notes for purchases and sales

• Dates of transactions

• Number of shares bought or sold

• Prices and exchange rates, if relevant

• Fees and charges

• Evidence of losses claimed

• Records of whether shares were held inside or outside an ISA

Common mistakes to avoid

• Using the total sale proceeds as the taxable gain, rather than deducting allowable costs

• Forgetting to account for shares bought at different times and prices

• Assuming ISA and non-ISA holdings have the same tax treatment

• Using outdated CGT rates or allowances

• Confusing dividends with capital gains. Dividends are subject to separate tax rules

• Ignoring eligible losses that may reduce taxable gains

• Forgetting same-day and 30-day share matching rules

• Not keeping records of costs, sales and fees

• Assuming a worked example applies to your personal tax position

Key takeaway

To calculate CGT on shares, work out the gain, account for eligible losses, deduct the available annual exempt amount and apply the relevant CGT rate based on your taxable income. For simple cases, the process may be straightforward. For pooled shares, frequent trading, employee shares, overseas shares or large gains, the calculation can become more complex.

Tax rules change and individual circumstances matter. Use this guide as an educational starting point and check HMRC guidance or seek qualified tax advice before filing.