UK Capital Gains Tax Guide
A plain-English explanation of how CGT works for UK self-directed investors.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit when you sell (or "dispose of") an asset that has increased in value. It's the gain you make — not the total amount of money you receive — that is taxed.
For UK investors, this applies to the sale of shares, ETFs, and other investments held outside of a tax-sheltered account (like an ISA or pension). Anything inside an ISA is completely exempt from CGT.
Key point: You only pay CGT when you sellshares. Simply holding shares that have gone up in value does not trigger a CGT event — the gain is "unrealised" until you sell.
The UK tax year runs from 6 April to 5 April the following year. For 2025-26, you have a £3,000 annual exempt amount — the first £3,000 of gains each year are tax-free.
The Section 104 Pool
When you buy the same share on multiple occasions, HMRC doesn't let you pick which specific shares you're selling. Instead, all your purchases of the same share are pooled together into a Section 104 pool.
The pool tracks two things: the total number of shares and the total cost (including all broker fees). The allowable cost per share is simply the total cost divided by total shares.
Example
- • January: Buy 100 shares of TSCO at £3.00 each = £300 cost
- • March: Buy 50 shares of TSCO at £3.50 each = £175 cost
- • Pool: 150 shares, total cost £475, average cost £3.17 per share
- • June: Sell 80 shares at £4.00 each = £320 proceeds
- • Allowable cost: 80 × £3.17 = £253.33
- • Gain: £320 − £253.33 = £66.67
- • Pool now: 70 shares, total cost £221.67
The 30-Day Rule (Bed & Breakfast)
The 30-day rule prevents you from selling shares at a loss and immediately buying them back to claim the tax benefit. If you sell shares and repurchase the same shares within 30 days, the disposal is matched against the new purchase — not the Section 104 pool.
This is formally known as the "bed and breakfast" rule. It was introduced to stop investors "selling before bed and buying back at breakfast".
Example
- • 1 June: Buy 100 shares of AAPL at £100 each = £10,000
- • 1 September: Sell 100 shares of AAPL at £80 each = £8,000 (apparent loss: £2,000)
- • 15 September: Buy 100 shares of AAPL at £85 each = £8,500
- • Because the repurchase is within 30 days, the sale is matched to the £8,500 buy
- • Actual allowable cost: £8,500 (not £10,000)
- • Actual loss: £8,000 − £8,500 = −£500 (not −£2,000)
Tax-loss harvesting tip: If you want to genuinely crystallise a loss, you must wait at least 30 full days before repurchasing the same shares.
The Same-Day Rule
If you buy and sell the same shares on the same day, those transactions are matched together first, before any other matching rule applies. This takes priority over both the 30-day rule and the Section 104 pool.
The Annual Exempt Amount
Everyone gets a tax-free allowance for capital gains each year. For the 2025-26 tax year, this is £3,000. Only gains above this threshold are taxed.
| Tax Year | Exempt Amount | Basic Rate | Higher Rate |
|---|---|---|---|
| 2021-22 | £12,300 | 10% | 20% |
| 2022-23 | £12,300 | 10% | 20% |
| 2023-24 | £6,000 | 10% | 20% |
| 2024-25 | £3,000 | 18%* | 24%* |
| 2025-26 | £3,000 | 18% | 24% |
* For 2024-25, rates were 10%/20% before 30 October 2024, then 18%/24% after the Autumn Budget.
How to Report on Self-Assessment
If your total proceeds from disposals exceed 4 × the annual exempt amount (£12,000 for 2025-26), or if you have taxable gains, you must report them on your self-assessment tax return.
You'll need to complete the SA108 supplementary page (Capital Gains). The key boxes to fill are:
- Number of disposals — how many sell transactions you made
- Total disposal proceeds — the total amount received from all sales
- Total allowable costs — the total cost basis of the shares sold
- Gains in the year before losses — total of all individual gains
- Losses in the year — total of all individual losses
CGT Tracker can help: Use our Reports page to download a pre-filled SA108 reference sheet with all these figures calculated for you.
The self-assessment deadline is 31 January following the end of the tax year (e.g., 31 January 2027 for the 2025-26 tax year).
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