UK Capital Gains Tax Guide

A comprehensive guide to understanding UK Capital Gains Tax for shares and investments.

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax on the profit when you sell (or 'dispose of') something (an 'asset') that's gone up in value. It's the gain you make that's taxed, not the amount of money you receive.

CGT Rates for 2024/25

Important: Tax rates for shares increased on 30 October 2024
Tax BandRate (Shares) - Before 30 OctRate (Shares) - From 30 OctRate (Residential Property)
Basic Rate10%18%18%
Higher Rate20%24%28%

Annual Exempt Amount

You can make gains of up to £3,000 (2024/25) before you need to pay Capital Gains Tax. This is known as your annual exempt amount or 'allowance'.

Note: The AEA was £6,000 in 2023/24 and £12,300 in 2022/23.

Section 104 Holdings

When you buy shares of the same company at different times, they are pooled together in what's called a 'Section 104 holding'. This means you calculate the average cost when you sell shares.

Example Calculation:

If you bought 100 shares at £10 each and later bought 50 shares at £15 each:

  • Total shares: 150
  • Total cost: (100 × £10) + (50 × £15) = £1,750
  • Average cost per share: £1,750 ÷ 150 = £11.67

The Same-Day Rule (1-Day Rule)

If you buy and sell shares of the same company on the same day, these transactions are matched together first. This is known as the same-day rule or 1-day rule.

Important: Same-day matching takes priority over all other matching rules, including the 30-day rule and Section 104 pooling.

Example: If you sell 50 shares of Company X on 15 March and buy 30 shares of Company X on the same day, those 30 shares are matched with 30 of the shares you sold. The remaining 20 shares sold are then matched using the 30-day rule or Section 104 pool.

The 30-Day Rule (Bed and Breakfasting)

If you sell shares and buy the same shares within 30 days, special rules apply to prevent 'bed and breakfasting' (selling and immediately rebuying to crystallize losses).

Allowable Costs

You can deduct certain costs from your capital gain:

  • The original cost of the asset
  • Costs of buying and selling (e.g., broker fees, stamp duty)
  • Costs of improving the asset
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⚠️ Important

This guide provides general information only. Always consult with a qualified tax advisor for specific advice about your situation.