Tax Guide
Capital Gains Tax on Shares in the UK: A Simple Guide
If you make a profit selling shares outside an ISA, you may owe Capital Gains Tax. Here is how it works and how to keep the bill as low as legally possible.
The basics
Capital Gains Tax, or CGT, is a tax on the profit you make when you sell an asset that has risen in value. For shares and funds, the gain is the difference between what you paid and what you sold for. You are taxed on the gain, not the total amount you receive.
Key takeaway
Everyone has a CGT annual allowance of £3,000 (2024/25). Gains below this are tax-free. Above it, basic-rate taxpayers pay 10% on shares and higher-rate taxpayers pay 20%. Gains inside an ISA are completely exempt.
The annual exempt amount
For the 2024/25 tax year, the first £3,000 of gains is tax-free. This allowance has fallen sharply in recent years (it was £12,300 in 2022/23), so more people now pay CGT than before. The allowance cannot be carried forward, so it is use-it-or-lose-it each year.
Current CGT rates on shares
| Your income tax band | CGT rate on shares |
|---|---|
| Basic rate | 10% |
| Higher rate | 20% |
| Additional rate | 20% |
Note that your gain is added on top of your income to determine which rate applies. A large gain can push part of itself into the higher-rate band even if your salary alone is in the basic-rate band.
Calculate your exact bill
Enter your salary and your gains and our tax calculator works out precisely what HMRC takes and what you keep.
Open the Tax CalculatorHow to legally reduce your CGT bill
- Use your ISA. Gains inside a Stocks and Shares ISA are entirely free of CGT. This is the single most effective shelter.
- Use your annual allowance every year. Spreading disposals across tax years can keep each year's gain under the £3,000 threshold.
- Offset losses. Capital losses can be set against gains to reduce the taxable amount.
- Transfer to a spouse. Assets transferred between spouses or civil partners are exempt, effectively doubling your combined allowance.
- Bed and ISA. Selling holdings and rebuying them inside an ISA moves future growth into the tax-free wrapper.
How to report and pay
If your total gains exceed the annual allowance, you must report them to HMRC, either through Self Assessment or the real-time CGT service. Keep records of purchase and sale prices and dates, as you will need them to calculate the gain accurately.
Frequently asked questions
How much can I make in shares before paying tax?
For 2024/25 you can make up to £3,000 in capital gains across all your assets before any Capital Gains Tax is due. Gains inside an ISA do not count toward this and are always tax-free.
What is the Capital Gains Tax rate on shares?
For shares and funds, basic-rate taxpayers pay 10% and higher or additional-rate taxpayers pay 20%, on gains above the £3,000 annual allowance (2024/25).
How do I avoid Capital Gains Tax on shares legally?
The most effective way is to hold investments inside a Stocks and Shares ISA, where all gains are tax-free. You can also use your annual allowance each year, offset losses, and transfer assets to a spouse to use their allowance.
Do I pay Capital Gains Tax inside an ISA?
No. All gains, dividends and interest earned inside an ISA are completely free of Capital Gains Tax and do not need to be reported to HMRC.
This guide is for general education only and does not constitute financial advice. Tax rules and figures are based on the 2024/25 UK tax year and may change. Always consider speaking with an FCA-registered adviser about your own circumstances.