When an individual disposes of assets they are liable to pay a tax if they make gains over a certain threshold. The duty that they may have to pay is known as Capital Gains Tax (CGT), and this applies particularly to the sale of shares. Not everyone who disposes of shares will be required to pay CGT. Rather, this will depend on your total capital gains during the tax year in question. You will not, therefore, necessarily pay CGT on every transaction in which you sell shares. Instead, all transactions that are liable for CGT (including the disposal of assets other than shares) are taken into account.
If you need guidance on declaring capital gains from share sales on your tax return, you may find it useful to try our free Self Assessment Helper.
Calculating Deductions
When calculating whether or not CGT will be payable at the end of each tax year, you must work out your net capital gains. This requires you to take the sum of your total gains and subtract from that a number of mitigating factors. The most important of these is the costs incurred by the initial acquisition, and eventual disposal of the assets. In the case of shares, this is most likely to consist of brokers' fees. You should also take into account any relief that is available to you; some of the relief that you qualify for will have already been deducted automatically, while the rest you will be expected to apply for yourself.
You may also be able to factor in a number of 'allowable losses' that have been suffered as a result of the disposal of other assets, with particular reference to assets, which now have only negligible value. This is covered in more detail in the article entitled Negligible Value Claim Relief on this site. It should also be remembered that the transfer of shares between an individual and their spouse or civil partner are always free from CGT. However, if the recipient then sells the shares they will be liable for the tax based on the cost to the first individual. If you give shares away to anyone else, however, you will need to pay CGT on their value at the time that you dispose of them.
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Annual Exempt Amount
Once you have calculated all of the deductions that can be made from your total gains, you must then factor in the Annual Exempt Amount (AEA). This is a non-taxable allowance below which capital gains are not taxed. The AEA is set at £3,000 for the 2025-26 tax year.
Shares pose a particular problem when calculating CGT. This is because each share is not individually identifiable. For example, an investor could buy shares in a company on one day at £1 per share, and more shares the next day at £5 per share. The problem, therefore, is calculating the relative gain or loss when the shares are sold.
In order to tackle this, the government has devised a set of rules regarding the way in which shares are 'grouped'. The most important part of these rules says that any shares bought on the same day should be grouped together for the sake of CGT calculations. However, these rules are complex and professional advice should always be sought in these circumstances.
The amount that you will be required to pay in CGT will depend on your total annual income. Your taxable gains are added to your other income, and form a separate 'top part' of your total income. From 30 October 2024, CGT rates on most assets including shares are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers.
any taxes on them if I sell.
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