Capital Gains Tax on Shares in the UK: The 2026 Guide (Plus Bed and ISA)

If you invest outside a tax wrapper, sooner or later you will meet capital gains tax on shares. It is the tax you pay on the profit when you sell an investment for more than you paid for it, and it catches out far more UK investors than it used to. The annual tax-free allowance has been cut sharply in recent years, so gains that would once have slipped under the radar now need reporting. This guide explains how capital gains tax actually works on shares and funds, how the share matching rules calculate your gain, and the legitimate housekeeping moves, including bed and ISA, that keep your bill as small as it should be.

Key Takeaways

Question	Short, Practical Answer
When do I pay CGT?	Only when you sell or otherwise dispose of an asset at a gain, not while you simply hold it.
Do ISAs and SIPPs count?	No. Gains inside a Stocks & Shares ISA or a SIPP are free of capital gains tax entirely.
How is my gain worked out?	Sale proceeds minus your pooled average cost, minus allowable dealing costs.
What is the 30-day rule?	Buying the same share back within 30 days matches the sale to that repurchase, cancelling the crystallised gain or loss.
What is bed and ISA?	Selling in a general account and rebuying inside your ISA, so future growth is sheltered for good.
What records do I need?	Every buy, sell, dividend and fee, per holding, going back to the first purchase.

1. What Capital Gains Tax Actually Taxes

Capital gains tax is charged on the increase in value of an asset between the day you acquired it and the day you disposed of it. For investors, the assets in question are usually shares, funds, exchange-traded funds, investment trusts and, increasingly, crypto.

The word to focus on is disposal. A disposal is not only a sale for cash. It also includes:

• Selling shares on the open market.
• Gifting shares to someone other than your spouse or civil partner.
• Swapping one asset for another, including crypto-to-crypto trades.
• A fund manager merging or restructuring a fund in certain ways.

Crucially, holding an asset that has doubled in value creates no tax charge at all. Unrealised gains are invisible to HMRC. The tax event happens the moment you sell, which is why the timing of your selling matters so much more than the timing of your buying.

You are taxed on what you realise, not on what you own. That single fact gives you far more control over your tax bill than most investors realise.

2. The Allowance, and Why It Matters More Than It Used To

Every individual has an annual exempt amount, a slice of gains you can realise each tax year with no tax to pay. That allowance has been reduced substantially over recent tax years, from over £12,000 down to £3,000 at the time of writing. Always confirm the current figure on GOV.UK before you act, because it is a number the Treasury has changed repeatedly.

Two consequences follow from a smaller allowance:

• Ordinary investors now get caught. A single holding up £4,000 since purchase can push you over the line on one sale.
• The allowance is use it or lose it. It does not roll forward. If you finish the tax year without using any of it, that capacity is gone.

Rates on gains from shares depend on which income tax band the gain falls into once it is stacked on top of your income. Basic rate taxpayers pay the lower rate, higher and additional rate taxpayers pay the higher one, and residential property is taxed at its own separate rates. Again, the exact percentages have moved more than once, so check the current table rather than trusting a figure you remember.

3. The Share Matching Rules: How Your Gain Is Actually Calculated

Here is where most people go wrong. If you bought the same share on five different dates at five different prices, you cannot simply pick the most expensive purchase to reduce your gain. HMRC applies a fixed matching order.

Rule one: same day

Any shares you sell are first matched against shares of the same class bought on the same day.

Rule two: the following 30 days

Next, the sale is matched against any purchases made in the 30 days after the disposal. This is the anti-avoidance rule commonly called the bed and breakfast rule, and it exists specifically to stop people selling on a Friday and buying back on a Monday purely to crystallise a gain or a loss.

Rule three: the section 104 pool

Anything left is matched against your section 104 holding, a single running pool of all your remaining shares in that company. The pool tracks two numbers: the total number of shares and the total cost. Your cost per share is simply the pool cost divided by the pool quantity, an average.

A quick illustration. Suppose you buy 100 shares at £10, costing £1,000, and later 100 more at £14, costing £1,400. Your pool is 200 shares costing £2,400, an average of £12 each. If you then sell 50 shares at £18, your gain is 50 multiplied by the £6 difference, so £300, less dealing costs. The £14 purchase does not get special treatment just because it was more recent or more expensive.

Average cost is the single most misunderstood number in UK investing. Your broker’s profit and loss column often uses a different convention, which is why broker screens and tax calculations disagree.

4. What You Can Deduct

Your gain is not simply the difference between the two prices on the screen. You may deduct genuine transaction costs, which is worth doing because they accumulate:

• Dealing commission on both the purchase and the sale.
• Stamp duty reserve tax paid on UK share purchases.
• Foreign exchange charges attributable to the trade, where they form part of the acquisition or disposal cost.

What you cannot deduct is ongoing platform or account fees, or interest on money you borrowed to invest. Those are costs of running the account, not costs of the individual transaction.

5. Losses: The Most Underused Tool You Have

Capital losses offset capital gains, and they are far more valuable than most investors treat them.

• Losses in the same tax year are set against gains automatically, before your annual allowance is applied.
• Unused losses can be carried forward indefinitely, but only if you report them, usually within four years of the end of the tax year in which they arose.
• Carried-forward losses are used only to reduce gains above the annual exempt amount, so they are not wasted on gains you would have sheltered anyway.

If you are sitting on a holding that has gone badly wrong and no longer fits your plan, realising the loss in a year where you also have gains can be genuinely efficient. The one thing you must not do is sell purely for the tax break and buy straight back, because the 30-day rule will simply cancel the loss.

6. Bed and ISA: Moving Assets Into Shelter

A bed and ISA is the standard workaround to the 30-day rule, and it is entirely legitimate. You sell a holding in your general investment account and immediately buy the same holding back inside your Stocks & Shares ISA. The 30-day matching rule does not bite, because the repurchase happens in a different tax wrapper and is treated as a separate acquisition by the ISA.

The effects are:

• You crystallise a gain in the general account, which you can size to sit within your annual exempt amount.
• The holding continues, with barely any time out of the market.
• All future growth and income on that holding is permanently outside the tax net.

The costs to weigh

Bed and ISA is not free. You pay the spread between sell and buy prices, potentially two dealing charges, though many platforms discount or waive one side, and stamp duty on the repurchase of UK shares. You also use up ISA allowance you may have wanted for new money. For small holdings the costs can outweigh the benefit, so run the numbers on the specific position rather than doing it reflexively.

Bed and spouse

Transfers between spouses and civil partners happen at no gain and no loss, meaning your partner inherits your original cost rather than the market value. That opens a second route: transfer part of a holding so that a future sale uses two annual allowances instead of one, and potentially your partner’s lower tax band. It requires a genuine, unconditional transfer of ownership, not a paper exercise.

7. A Simple End-of-Tax-Year Routine

Most of the value in CGT planning comes from a short review before 5 April, not from clever manoeuvres. A workable routine:

• Total your realised gains so far this tax year. You need the figure before you can plan anything.
• Check your unrealised positions. Identify holdings with meaningful gains and meaningful losses.
• Use the allowance deliberately. If you have unused exemption and a position you were going to trim anyway, trimming it before 5 April uses capacity that otherwise disappears.
• Consider a bed and ISA on your largest unsheltered holding, sized so the crystallised gain fits the allowance.
• Harvest losses that are genuinely dead money, and record them so they carry forward.
• Leave yourself time. Settlement and platform processing mean the last week of the tax year is a bad time to start.

Notice that every step depends on knowing your real cost basis and your realised gains to date. That is a record-keeping problem before it is a tax problem, which brings us to the practical part.

8. Reporting: What HMRC Expects

You generally need to report gains if your total gains exceed the annual exempt amount, or if your total proceeds exceed the reporting threshold, even where no tax is due. Reporting happens either through a Self Assessment return or through HMRC’s real-time capital gains service for people who do not otherwise file.

Whichever route applies, the burden of proof sits with you. HMRC expects you to be able to show, per holding, every acquisition and disposal with dates, quantities, prices and costs. If a holding has been running for a decade across two platform transfers, reconstructing that history after the fact is genuinely painful. Keeping it as you go is not.

9. Where Crypto and Overseas Holdings Complicate Things

Two areas trip investors up more than any others.

Crypto

HMRC treats most crypto as an asset for CGT purposes, and section 104 pooling applies per token. Critically, crypto-to-crypto swaps are disposals, so a year of active trading can produce a long list of taxable events with no cash ever leaving the exchange. See our guide on tracking crypto and stocks in one portfolio for how to keep that history in one place.

Foreign currency holdings

If you buy a US stock in dollars and sell it in dollars, your gain must still be computed in sterling, using the exchange rate on the date of each transaction. A position that is flat in dollars can produce a sterling gain, or a sterling loss, purely from currency movement. This surprises people every year, and it is a good reason to understand your currency exposure in the first place.

10. How InvestInsight Helps With the Record-Keeping

Nothing in this article is difficult in principle. It is difficult in practice because the raw material, a complete and accurate transaction history across every account you have ever held, is exactly what most investors lack.

InvestInsight’s portfolio tracker keeps that history in one place. Every buy and sell you import or sync stays on the record with its date, quantity, price and fees, so your average cost per holding is always there rather than being reconstructed from statements each spring. Because ISA, SIPP and general accounts sit side by side in the same view, you can see immediately which gains are sheltered and which are exposed, which is the first question any CGT review has to answer.

The dividend tracker covers the other half of the picture, since dividends paid outside a wrapper have their own allowance and their own reporting. And because holdings are tracked in their native currency and converted for display, the sterling value of an overseas position is not a mystery you have to solve with a spreadsheet.

Good tax outcomes rarely come from clever schemes. They come from an investor who knows their numbers in February rather than discovering them the following January.

11. Common Mistakes to Avoid

• Assuming your broker’s profit figure is your taxable gain. It usually is not, because brokers do not apply section 104 pooling or the 30-day rule.
• Selling and rebuying within 30 days. It achieves nothing for tax and costs you two lots of dealing charges.
• Forgetting to report losses. An unreported loss cannot be carried forward, and this is a pure own goal.
• Leaving it until April. Platform processing times mean late trades may not settle in the tax year you intended.
• Ignoring crypto swaps. Each one is a disposal, whether or not you took any money out.
• Letting the tax tail wag the investment dog. Holding a bad investment purely to avoid a tax bill is usually the more expensive decision.

Conclusion

Capital gains tax on shares is not complicated once you separate the two halves of it. The tax rules themselves are mechanical: match your disposals in the prescribed order, work out the gain against your pooled average cost, apply your allowance, and report what is left. The genuinely hard part is having a clean, complete transaction history to feed into that calculation, and that is a habit rather than a skill.

Do the simple things well. Shelter what you can inside an ISA or SIPP, use your annual exemption deliberately rather than accidentally, record your losses so they are available later, and consider a bed and ISA on your largest unsheltered position each year. If you want the underlying records to be there when you need them, keep every account in one place with InvestInsight’s portfolio tracker, and turn the annual tax review into an afternoon rather than an ordeal.

Further reading

Tax rules and allowances change frequently. Always confirm current figures against the official guidance before acting.

• GOV.UK: capital gains tax
• GOV.UK: share identification rules
• GOV.UK: individual savings accounts (ISAs)

This article is for general information only and does not constitute financial or tax advice. Tax treatment depends on your individual circumstances and may change. All figures are illustrative. Consider speaking to a qualified adviser or accountant before acting.