In this section:
- Capital Gains Tax on shares: the basics
- Capital Gains Tax reliefs on shares
- Selling or disposing of part of your shareholding
- How to calculate capital gains on shares
Capital Gains Tax on shares: the basics
You may have to pay Capital Gains Tax if you make a profit or gain when you sell, give away, exchange or otherwise dispose of your shares and certain other investments, such as securities and debentures.
You usually have to report any gains and losses by completing a Self Assessment tax return.
On this page:
- What is Capital Gains Tax?
- Common kinds of investments
- Working out Capital Gains Tax
- Reporting a gain or loss
- Shares of the same kind bought at different times
- Losses on worthless shares
- Giving away shares
- Employee Share Schemes
- Company take-overs and reorganisations
- More useful links
What is Capital Gains Tax?
Capital Gains Tax is a tax on the profit or gain you make when you sell or otherwise ‘dispose of’ an asset, such as shares.
You usually dispose of an asset when you cease to own it - for example if you sell it, give it away as a gift, transfer it to someone else or exchange it for something else.
In some cases you may be treated as if you've disposed of an asset. For example, if you make a claim that your shares have lost their value, you may be able to claim a loss - even though you still own the shares (see 'losses on worthless shares' below).
It's the gain you make - not the amount of money you receive for the asset - that's taxed.
Common kinds of investments
Investments liable to Capital Gains Tax when you sell or dispose of them include:
- stocks and shares in a company
- units in a unit trust
- debentures, bonds (but not premium bonds) and certain securities - these are generally investments in or loans to a company or the government
If your security is a 'gilt-edged security' (also called 'gilts'), for example a Premium Bond or National Savings Certificate, it's exempt from Capital Gains Tax. Most 'Qualifying Corporate Bonds' are exempt too.
See more on gilts and Qualifying Corporate Bonds in the glossary
Working out Capital Gains Tax
To work out your Capital Gains Tax you'll need to look separately at each asset disposed of that's liable to Capital Gains Tax and in straightforward cases:
- Take the disposal proceeds (usually the amount received) and deduct your costs and tax reliefs to work out each gain or loss.
- Add together all of your gains for that tax year.
- Add together all of the losses you've made for that tax year.
- Deduct any allowable losses you've made that year from the gains to work out the overall gain or loss.
- If the overall gain is below the annual tax-free allowance (known as the ‘Annual Exempt Amount’), there's no Capital Gains Tax to pay. The Annual Exempt Amount for individuals is £9,600 for 2008-09 and £10,100 for 2009-10.
- If the overall gain is above the Annual Exempt Amount, you may be able to deduct unused losses from earlier years.
- If the overall gain is still above the Annual Exempt Amount, you deduct the Annual Exempt Amount and pay tax at 18 per cent on the balance.
If you've made any losses you'll need to claim them in order to set them off against your gains. To find out more about this - and working out gains and losses - see the links below.
More on claiming and using losses
See a step-by-step guide to working out Capital Gains Tax on shares
Reporting a gain or loss
Capital Gains Tax is paid through the Self Assessment system and will be calculated as part of your Self Assessment tax return. If you haven't received a tax return, but think you need one you should contact your Tax Office. You may face a penalty if you don't.
You should keep any records and information that might help you work out your capital gain or loss.
More on reporting gains and time limits
Shares of the same kind bought at different times
You may have bought or acquired shares or securities of the same kind at different times and at different prices and sold some - but not all - of them at the same time.
Example
You bought 200 shares for £500 in January 2006.
You bought another 300 shares of the same type in the same company for £600 in February 2007.
You sold 250 of the shares in May 2008.
To work out the gain or loss, you first need to identify which shares you've sold and then work out what they cost you.
This is not as straightforward as when you sell a single asset, such as a painting and there are some special rules that you need to follow. Follow the link below to see the rules and some examples.
Selling or disposing of part of your shareholding
Losses on worthless shares
Sometimes shares lose all or most of their value during the time you've owned them - perhaps because the company stops trading or goes into liquidation.
If you own shares that become worthless, or almost worthless, you might be able to make what's known as a ‘Negligible Value Claim’, ie a claim that the value is negligible (almost nil).
When you make a Negligible Value Claim, if all the conditions are met, you're treated as if you’d sold the shares and then bought them back again at their value on the earliest of the following dates:
- the date that HM Revenue & Customs receive the claim
- a date you specify on the claim that may be in either of the two previous tax years (if the shares became worthless or almost worthless at that time or earlier)
You then work out the loss as if you'd sold the shares for their negligible value on that date.
Download the latest help sheet on Negligible Value Claims - Help Sheet 286 (PDF 75K)
See a list of companies whose shares have negligible value
Giving away shares
When you give away shares - or sell them for less than they're worth - you usually work out your gain or loss as if you've sold the shares at market value (the price you'd expect to receive if you sold them on the open market).
Some exceptions are if you can claim Gift Hold-Over Relief or if you give the shares to your husband, wife or civil partner or to a registered charity - there's more on this below.
Gift Hold-Over Relief
Some gifts of shares may qualify for Gift Hold-Over Relief - a relief that allows you to postpone the gain.
These must be shares in a trading company, or the holding company of a trading group, and either of the following must apply:
- the shares aren't listed on a recognised stock exchange
- you've at least 5 per cent of the voting rights in the company
Read about Gift Hold-Over relief and other reliefs on shares
See the glossary for more on 'trading companies'
Giving shares to your spouse or civil partner
You don’t pay Capital Gains Tax when you give (or otherwise dispose of) shares, to your husband, wife or civil partner - as long as both of the following apply:
- you've lived together for any part of the tax year in which you made the gift
- the gift isn't ‘trading stock’ (trading goods bought for resale)
When your husband, wife or civil partner later sells or disposes of the shares, they may have to pay Capital Gains Tax. It's useful to keep a note of what the shares cost you, as your spouse or civil partner may need this to work out their Capital Gains Tax when they dispose of them.
Giving shares to charity
You won’t have to pay Capital Gains Tax on a gift of shares to a registered UK charity.
Employee Share Schemes
You might get shares through schemes such as:
- Share Incentive Plans
- Save As You Earn schemes
- Company Share Option Plans
These schemes are approved by HM Revenue & Customs and have special rules. As long as you follow the rules, you might pay less Capital Gains Tax when you sell or dispose of the shares - or none at all.
Download the latest help sheet on Employee Share Schemes - Help Sheet 287 (PDF 66K)
Company take-overs and reorganisations
If you get bonus shares (new free shares) or shares in exchange for your existing shares, your shareholding may change.
There are special rules that deal with this and in many cases you won’t have to pay any Capital Gains Tax at the time of the reorganisation or take-over.
Company reorganisations - more about Capital Gains Tax
Company take-overs - more about Capital Gains Tax
