Investing Basics

Capital Gains Tax on shares: what UK investors actually owe and when

Capital gains tax on shares for UK investors: the £3,000 annual exempt amount, 18% and 24% rates, ISA exemption, and how to report what you owe to HMRC.

By Ben Walker · May 18, 2026

Most UK investors never have to think about Capital Gains Tax. But when you do sell shares outside an ISA and you have made a meaningful gain, knowing the rules in advance saves you from an unpleasant surprise in January.

Reviewed by James Whitfield, Senior Editor · May 18, 2026, 21:52

In this article

The Short Version

Capital gains tax is charged on the profit you make when you sell shares, not on the total amount you receive.
Every individual has a tax-free annual exempt amount of £3,000 for the 2026 to 2027 tax year. Gains below this threshold are not taxed.
Above that threshold, basic rate taxpayers pay 18% and higher or additional rate taxpayers pay 24%.
Shares held inside a stocks and shares ISA are entirely exempt from capital gains tax. Most private investors should use their ISA allowance first.
You do not pay capital gains tax until you actually sell. Unrealised gains on paper are not taxed.
Stamp duty of 0.5% applies when you buy most UK-listed shares, not when you sell.

What Capital Gains Tax is and when it applies

Capital Gains Tax is a tax on the profit you make when you sell or dispose of an asset that has increased in value. For investors, that usually means shares. The taxable gain is the difference between what you paid for the shares (your cost, including any dealing charges) and what you received when you sold them.

Two important things to understand at the outset. First, Capital gains tax is only triggered when you sell. If you bought shares in a company five years ago and they have doubled in value, you owe nothing while you continue to hold them. The tax becomes relevant only when you decide to sell. Second, CGT applies to shares held outside an ISA or pension wrapper. If your shares are inside a stocks and shares ISA, gains are exempt entirely, regardless of size.

Taper relief, which used to reduce the capital gains tax bill based on how long you had held an asset, was abolished in April 2008. It no longer exists. What you pay now depends on your income, not on how long you held the shares.

The annual exempt amount: your £3,000 tax-free buffer

Each tax year, every individual has a Capital Gains Tax annual exempt amount. For 2026 to 2027, this is £3,000. You can make up to £3,000 of gains across all your investments in the tax year without paying any CGT at all.

This allowance has been cut significantly in recent years. It stood at £12,300 as recently as 2022 to 2023, before being reduced in stages to the current £3,000. The government has confirmed it will remain at this level for the foreseeable future.

The exempt amount applies to your total gains across all disposals in the tax year, not per transaction. If you sell shares in three different companies and make gains of £1,200, £900 and £1,100 across those sales, your total gain is £3,200. You would pay CGT on £200, the amount above the £3,000 threshold.

Losses can be offset against gains in the same tax year or carried forward to future years. If you sell some shares at a gain and others at a loss, you can subtract the losses from the gains before calculating your tax bill. Keeping records of losses is worthwhile even if you do not need them immediately.

How the rates work: 18% or 24%?

The rate you pay depends on your overall income. Since October 2024, the capital gains tax rates on shares have been 18% for basic rate taxpayers and 24% for higher or additional rate taxpayers. These replaced the previous rates of 10% and 20%, so the cost of selling outside an ISA has increased noticeably.

To work out which rate applies to you, the calculation runs as follows. Take your taxable income for the year (earnings minus your personal allowance and any other reliefs). Then add your taxable gains (after deducting the annual exempt amount). If the combined total remains within the basic rate band of £37,700 for 2026 to 2027, you pay 18%. If the combined total pushes above that band, you pay 24% on the portion above it.

This means some investors will pay tax at both rates in the same year, with the 18% rate applying to the portion of gains that falls within the basic rate band and 24% on the remainder. HMRC’s guidance recommends applying the annual exempt amount against the gains that would be taxed at the highest rate, which reduces the overall bill slightly.

The ISA: why most UK investors never pay capital gains tax at all

A stocks and shares ISA is the single most effective tool for avoiding capital gains tax on investments. Any gains you make on shares inside an ISA are entirely exempt. There is no limit on the size of the gain. You do not need to report it. It simply does not count.

The annual ISA allowance for 2026 to 2027 is £20,000 per person. Contributions not used in a tax year cannot be carried forward. Most private investors who keep their investments inside an ISA and stay within the annual limit will never pay CGT on shares at any point in their lifetime.

The practical implication is straightforward: invest inside your ISA first. If you have shares held outside an ISA that have grown significantly, it may be worth considering whether you can gradually shelter them by selling and repurchasing inside an ISA each year, making use of your annual exempt amount to keep the tax on any gains to a minimum. This is sometimes called bed and ISA. Getting independent advice on whether this makes sense for your specific situation is sensible before acting.

Stamp duty: the tax you pay when you buy

Stamp Duty Reserve Tax applies when you buy UK-listed shares, not when you sell them. The rate is 0.5% of the purchase price, applied automatically by your broker at the time of the transaction. You do not need to do anything to pay it.

Stamp duty does count as part of your acquisition cost for capital gains tax purposes. If you paid £5,000 for shares and £25 in stamp duty, your cost base for CGT is £5,025. This reduces your eventual gain when you come to sell.

Shares traded on AIM attract stamp duty at the same 0.5% rate when held in a general dealing account. AIM shares held inside an ISA remain exempt from capital gains tax on any gains, so the stamp duty point is most relevant for investors operating outside an ISA wrapper.

How to report and pay what you owe

If your gains in a tax year exceed the annual exempt amount, you are required to report them to HMRC and pay any tax owed. The usual route is through Self Assessment. You need to file a tax return and include a Capital Gains summary on the SA108 form.

If your only income is employment income and you do not normally file a self-assessment return, you can also report capital gains using HMRC’s online Real Time Transaction service for disposals of listed shares, without completing a full return. This is more straightforward for straightforward cases.

The deadline for paying capital gains tax through Self Assessment is 31 January following the end of the tax year in which you made the gains. Tax year 2026 to 2027 runs from 6 April 2026 to 5 April 2027, so any CGT owed for that year would be due by 31 January 2028.

Keep records of what you paid for shares, including dealing charges and stamp duty, and what you received when you sold them. Your broker will provide contract notes for each transaction, and most platforms now provide annual summaries that make this easier.

A Worked Example

Suppose you are a basic rate taxpayer with a taxable income of £28,000. In the 2026 to 2027 tax year, you sell shares outside an ISA and make total gains of £8,000.

First, subtract the annual exempt amount: £8,000 minus £3,000 leaves £5,000 of taxable gains. Now add this to your taxable income: £28,000 plus £5,000 gives a combined figure of £33,000. This is less than the basic rate band limit of £37,700, so you pay CGT at 18% on the full £5,000. The tax due is £900.

If your taxable income were instead £35,000, adding the £5,000 in taxable gains would give a combined figure of £40,000. That is £2,300 above the basic rate band of £37,700. You would pay 18% on £2,700 (the portion within the band) and 24% on £2,300 (the portion above it). That works out to £486 plus £552, giving a total CGT bill of £1,038.

Neither scenario applies to shares held inside a stocks and shares ISA, where the gain would be zero for tax purposes regardless of its size.

What This Means For You

For most private investors, the practical priority is to use the ISA allowance fully each year before investing outside it. If your investments are already sheltered inside an ISA, CGT is not a concern you need to manage actively.

If you do have shares outside an ISA, it is worth reviewing gains at the end of each tax year. Making use of your annual exempt amount each year rather than allowing large unrealised gains to build up outside the ISA wrapper can reduce the eventual tax bill over time. Selling enough to crystallise gains up to the £3,000 threshold each year, and then repurchasing inside an ISA if desired, is a common strategy worth discussing with a financial adviser or tax professional.

The reduction in the annual exempt amount from £12,300 to £3,000 since 2022 makes this more relevant than it used to be. A gain that would have been entirely covered by the old allowance may now be partially taxable, which changes the calculation for investors with larger portfolios outside an ISA.

In Plain English

Capital gains tax on shares is a tax on the profit you make when you sell. You get a £3,000 tax-free allowance each year before capital gains tax kicks in. Above that, basic rate taxpayers pay 18% and higher rate taxpayers pay 24%. Shares inside an ISA are completely exempt. You pay 0.5% stamp duty when you buy most UK shares, not when you sell them. You do not owe anything until you actually sell, so unrealised gains on paper are just paper.