Capital Gains Tax on Shares UK

Capital Gains Tax on Shares and Investments: What You Need to Know

If you’re selling shares or other investments, it’s important to understand how Capital Gains Tax (CGT) works and when it may apply.

In simple terms, CGT is a tax on the profit (or gain) you make when you dispose of an asset that has increased in value. It’s not based on what you sell it for, but on the difference between what you paid and what you receive.

For example:
If you purchase shares for £3,000 and later sell them for £8,000, your taxable gain is £5,000.

When does CGT apply?

CGT can arise when you “dispose” of an investment. This includes:

• Selling shares or funds
• Gifting investments to someone else
• Exchanging one asset for another
• Receiving compensation for an asset

If you own investments jointly, you are only taxed on your share of the gain.

What’s exempt from CGT?

Not all investments are subject to Capital Gains Tax. Common exemptions include:

• Investments held within ISAs or PEPs
• UK government gilts
• Premium Bonds
• Gambling winnings

These can form a valuable part of a tax-efficient investment strategy.

Your CGT allowance

Everyone has an annual tax-free CGT allowance (known as the Annual Exempt Amount).

For the current tax year, this is £3,000

You will only pay CGT on gains above this threshold.

CGT rates on shares and investments

The rate of CGT you pay depends on your total taxable income.

For most investments such as shares:

• Basic rate taxpayers: 10% (within the basic rate band)
• Higher or additional rate taxpayers: 20%

If your gains push you into a higher tax band, part of your gain may be taxed at 10% and the remainder at 20%.

Reporting and paying CGT

If your total gains exceed your annual allowance, you must:

• Report them via a Self Assessment tax return
• Pay any CGT due by the relevant HMRC deadline

Keeping accurate records is critical. You should retain:

• Purchase and sale costs
• Dates of transactions
• Associated fees (e.g. broker charges)
• Using losses and reliefs

If you’ve made losses on other investments, these can often be used to reduce your taxable gains.

There may also be additional tax reliefs available depending on your circumstances, helping to minimise your overall liability.

Planning ahead makes a difference

With careful planning, many investors can reduce or even eliminate CGT. Common strategies include:

• Using ISA allowances efficiently
• Timing disposals across tax years
• Making use of both partners’ allowances
• Crystallising losses where appropriate

How we can help

Capital Gains Tax can quickly become complex, particularly if you have multiple investments or regularly trade shares.

At Charlton Baker, we support individuals with:

• Tax planning for investments
• Self Assessment and CGT reporting
• Strategic advice to minimise tax liabilities

Taking advice early can ensure you keep more of your returns and avoid unexpected tax bills. Get in touch with our team today (01380 723692 / email) to discuss your investment strategy and tax position.