Do You Pay Tax When You Sell Shares in the UK?
Investing has become much more accessible.
Online platforms now make it possible to buy and sell shares within minutes, and more people are building investment portfolios outside pensions and workplace schemes.
But selling an investment for more than you paid for it can create a tax question:
Do you have to pay tax when you sell shares?
Potentially, yes.
For shares held outside tax-advantaged accounts such as ISAs, a profit on disposal can fall within Capital Gains Tax.
That does not mean every share sale creates a tax bill. The calculation depends on your gain, available losses, annual exemption and wider taxable income.
Understanding the rules before selling a large investment can prevent unexpected tax liabilities.
Capital Gains Tax applies to the profit, not the sale proceeds
A common misunderstanding is that Capital Gains Tax is charged on the entire amount received when shares are sold.
Generally, the starting point is the gain.
For example:
- Shares originally cost: £15,000
- Shares sold for: £25,000
- Gain before allowable costs: £10,000
You would not normally calculate Capital Gains Tax on the full £25,000.
The relevant amount begins with the £10,000 gain, before considering allowable costs, losses and exemptions.
What costs can affect the gain?
When calculating a gain, certain costs associated with buying and selling the investment may potentially be taken into account.
These can include eligible transaction costs such as dealing fees.
Keeping accurate records is therefore important.
Useful documents include:
- Contract notes
- Purchase confirmations
- Disposal statements
- Broker reports
- Transaction fees
- Records of reinvested distributions
- Details of corporate actions
If shares have been bought over many years, establishing the correct acquisition cost can become more complicated.
What is the Capital Gains Tax annual exemption?
For 2026/27, individuals have a Capital Gains Tax annual exempt amount of £3,000.
This means the first £3,000 of net taxable gains falling within the exemption may not create a Capital Gains Tax charge.
For example, if your only taxable gain during the year is £2,500, it may fall entirely within the annual exemption.
If your gain is £10,000, the exemption could reduce the taxable amount to £7,000 before other relevant adjustments.
The exemption applies to your gains across the tax year, rather than separately to every investment sold.
What are the Capital Gains Tax rates for 2026/27?
For disposals from 6 April 2026, the main Capital Gains Tax rates for individuals are generally:
- 18% where the taxable gain falls within the available basic-rate band
- 24% where the gain falls above it
Higher- and additional-rate taxpayers generally pay 24% on taxable gains.
For basic-rate taxpayers, the calculation depends on both taxable income and taxable gains.
This means two people making exactly the same share gain could pay different amounts of Capital Gains Tax.
A simple example
Suppose you have taxable income of £25,000 and make a £13,000 gain on shares.
First deduct the £3,000 annual exemption.
That leaves a taxable gain of £10,000.
You then consider how much of your basic-rate Income Tax band remains available.
If the whole taxable gain falls within the remaining basic-rate band, it could be taxed at 18%.
If part of the gain pushes you above the basic-rate band, part may be taxed at 18% and the remainder at 24%.
This is why Capital Gains Tax cannot always be calculated by simply multiplying the gain by one headline rate.
What if the shares are inside an ISA?
Shares held inside a qualifying ISA are generally sheltered from Capital Gains Tax.
HMRC specifically lists gains made within ISAs as exempt from Capital Gains Tax.
This is one of the major advantages of using an ISA for investments.
If the same investment is held outside an ISA, future disposals may need to be considered for Capital Gains Tax.
What about shares inside a pension?
Investments held within registered pension arrangements are subject to their own tax rules and do not operate like a normal personal investment account.
You do not generally calculate Capital Gains Tax every time investments are bought and sold inside the pension.
However, pensions have separate rules around:
- Contributions
- Annual allowances
- Access
- Withdrawals
- Income Tax
The best investment wrapper depends on your wider financial circumstances rather than Capital Gains Tax alone.
Selling shares at a loss can still matter
A loss on an investment may feel purely negative.
From a tax perspective, however, allowable capital losses can potentially be used against capital gains.
For example:
- Gain on Investment A: £15,000
- Loss on Investment B: £5,000
The loss may reduce the net gain before the annual exemption is considered, subject to the applicable rules.
This can significantly reduce the amount of Capital Gains Tax payable.
Do not ignore old losses
Capital losses from previous tax years may also be relevant if they were properly notified and remain available.
If you have invested for several years, review whether you have:
- Historic share losses
- Property losses
- Losses on other chargeable assets
These could potentially affect the tax calculation on a future disposal.
Good record keeping is important because it can be difficult to reconstruct historic losses years later.
Buying the same shares back immediately may not work as expected
Investors sometimes assume they can sell shares to use their annual exemption and immediately repurchase exactly the same investment.
Capital Gains Tax contains share identification rules that can affect which acquisition cost is matched to a disposal.
These rules can apply to shares acquired:
- On the same day
- Within 30 days after the sale
- From the wider pooled holding
This means planning share disposals purely around the annual exemption can be more complicated than it appears.
Tax should be considered before carrying out transactions rather than reconstructed afterwards.
What if you received the shares from work?
Employee shares can have additional tax implications.
Examples include:
- Share options
- Employee share schemes
- Restricted shares
- Shares acquired below market value
There may have been Income Tax or National Insurance consequences when the shares were received or exercised.
That history can affect the acquisition cost used for a later Capital Gains Tax calculation.
Keep documentation from the employer or scheme administrator.
What if you inherited the shares?
When someone dies, assets are generally rebased for Capital Gains Tax purposes to their value at the date of death rather than simply carrying forward the deceased person’s original purchase cost.
Inheritance Tax and Capital Gains Tax are separate taxes.
If you inherit shares and later sell them, the relevant gain generally arises from the change in value after inheritance.
Keep estate documentation showing the probate value assigned to the shares.
What if the shares were gifted to you?
Gifting shares can itself create Capital Gains Tax consequences for the person making the gift.
For many gifts, Capital Gains Tax calculations use market value rather than simply the amount of money that changes hands.
Different rules can apply to transfers between spouses or civil partners and to certain qualifying business assets.
Large share gifts should therefore be considered before the transfer is made.
What about cryptocurrency?
Cryptoassets are not shares, but many of the same Capital Gains Tax principles can arise when individuals dispose of them.
A disposal can include:
- Selling for pounds
- Swapping one cryptoasset for another
- Spending crypto
- Gifting crypto in certain circumstances
The record-keeping challenge can be significantly greater because investors may have hundreds of transactions across several platforms.
Cryptoassets should not simply be treated as cash for tax purposes.
Do dividends affect Capital Gains Tax?
Dividends and capital gains are different forms of income for tax purposes.
If you own shares, you might receive:
- Dividends while holding them
- A capital gain when selling them
Dividend income is subject to dividend taxation.
The sale of the shares may create a Capital Gains Tax calculation.
One investment can therefore potentially generate both types of taxable income at different times.
Do you have to report every share sale?
Not necessarily.
Whether a disposal needs reporting depends on:
- The amount of gains
- Available exemptions
- Total disposal proceeds in relevant circumstances
- Losses
- Whether you already complete Self Assessment
- Other reporting requirements
Do not assume that having no tax to pay automatically means there is never anything to report.
Your wider tax position matters.
Keep an investment record
A simple record should include:
- Investment name
- Purchase date
- Number of shares
- Purchase cost
- Purchase fees
- Sale date
- Sale proceeds
- Sale fees
- Dividends received separately
- Relevant corporate actions
If you invest regularly, downloading annual transaction reports from your broker can save a considerable amount of work later.
Do not assume the platform will retain every historic transaction indefinitely.
Think before selling a large portfolio
If you are planning to dispose of a substantial investment, it can be useful to estimate the tax position first.
Consider:
- Unrealised gains
- Available annual exemption
- Capital losses
- Other disposals during the year
- Current taxable income
- Whether some assets are inside ISAs
- Timing of the disposal
- Whether the money is needed immediately
Tax should not be the only reason to hold or sell an investment, but understanding the consequences can help avoid surprises.
Frequently Asked Questions
How much profit can I make on shares before paying Capital Gains Tax?
For 2026/27, the individual annual exempt amount is £3,000, although losses and other gains also affect the calculation.
What rate of Capital Gains Tax do I pay on shares?
For gains from 6 April 2026, the main individual rates are generally 18% within the available basic-rate band and 24% above it.
Do I pay Capital Gains Tax on shares held in an ISA?
Gains within qualifying ISAs are generally exempt from Capital Gains Tax.
Can share losses reduce Capital Gains Tax?
Allowable capital losses can potentially reduce taxable capital gains, subject to the relevant rules.
Is Capital Gains Tax charged on the amount I sell the shares for?
Generally, no. It is based on the gain after considering acquisition cost, qualifying costs and other relevant adjustments.
Do dividends count towards Capital Gains Tax?
No. Dividends are taxed separately under the dividend-income rules. Capital Gains Tax can arise when the underlying shares are disposed of.
Final thoughts
Selling shares does not automatically mean you owe tax.
But where investments have increased substantially in value, Capital Gains Tax should be considered before a significant disposal.
The key factors include:
- Purchase cost
- Sale proceeds
- Transaction costs
- Capital losses
- £3,000 annual exemption
- Your taxable income
- Whether the investment sits inside an ISA
At Merranti Accounting, we help individuals understand how investment income, Capital Gains Tax and wider personal taxation fit together.
Contact Merranti Accounting if you need help understanding the tax consequences of selling investments.
Written by Jenny Seaford ACPA
Senior Accountant, Merranti Accounting
Jenny is a Senior Accountant at Merranti Accounting, supporting individuals and businesses with accounts, tax and financial reporting. She helps clients understand their tax position and ensure their financial records provide the information needed for accurate reporting.
Author image: Use Jenny’s existing Merranti headshot.
