Capital Gains Tax on shares: the basics

You may have to pay Capital Gains Tax if you make a profit when you dispose of shares and certain other investments, securities or debentures. Disposing of shares includes selling, giving away or exchanging them.

You report any gains and losses by completing a Self Assessment tax return.

On this page:

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. You might sell it, give it away, 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, you may be able to claim a loss on shares that have lost their value even though you still own them. See the section 'losses on worthless shares' below.

You pay tax on the gain you make, not the amount of money you receive for the asset.

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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

'Gilt-edged securities' (also called 'gilts') are exempt from Capital Gains Tax. These include Premium Bonds and National Savings Certificates. Most 'Qualifying Corporate Bonds' are exempt too.

See more on gilts and Qualifying Corporate Bonds in the glossary

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Working out Capital Gains Tax

In straightforward cases you need to

  1. look separately at each asset disposed of that's liable to Capital Gains Tax and work out each gain or loss
  2. add together the gains and take away any losses
  3. deduct your tax-free allowance (known as the Annual Exempt Amount)
  4. work out the tax due on the gains that remain

Read the step-by-step guide below to find out more.

See Capital Gains Tax rates and annual tax-free allowances

See a step-by-step guide to working out Capital Gains Tax on shares

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Reporting a gain or loss

If you have Capital Gains Tax to pay, you must complete a tax return. This also applies if you want to claim a loss. Contact HM Revenue & Customs (HMRC) if you haven't received a letter asking you to complete a tax return.

If you normally complete a Self Assessment tax return, you need to check if your gains need reporting (see the reporting link below). To report a gain or claim a loss complete the additional Capital Gains Tax pages of the tax return.

You should keep any records and information that might help you work out your capital gain or loss. If you've made a loss on a disposal, you'll need to claim it in order to set it off against your gains.

More on reporting gains and time limits

How and when to claim a loss

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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. You may have sold some of them, but not sold them all at the same time.

Example

You bought 200 shares for £500 in January 2009.

You bought another 300 shares of the same type in the same company for £600 in February 2010.

You sold 250 of the shares in August 2013.

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. 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

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Losses on worthless shares

Sometimes shares lose all or most of their value during the time you own them. This might be 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'. This is a claim that the value is negligible (almost nil).

Your Negligible Value Claim must meet some conditions. HMRC will then treat you as if you'd sold the shares and bought them back at their value on the earliest of the following dates:

  • the date HMRC receives the claim
  • a date you specify on the claim

The date you specify may be in either of the two previous tax years, if the shares became worthless or almost worthless then 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 helpsheet on Negligible Value Claims - Helpsheet 286 (PDF 80K)

See a list of companies whose shares have negligible value

How and when to claim a loss

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Giving away shares

When you give away shares you usually work out your gain or loss as if you've sold the shares at market value. The market value is the price you would expect to receive if you sold them on the open market. This also applies if you sell them for less than their full value.

There are some exceptions:

  • if you can claim Gift Hold-Over Relief
  • if you give the shares to your husband, wife or civil partner
  • if you give shares to a registered charity

There's more on these exceptions 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 one of the following must apply:

  • the shares aren't listed on a recognised stock exchange
  • you've at least 5% 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, providing 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. 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.

Find out more about gifts

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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 HMRC and have special rules. If you follow the rules, you pay less Capital Gains Tax when you sell or dispose of the shares - or none at all.

Download the latest helpsheet on Employee Share Schemes - Helpsheet 287 (PDF 80K)

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Employee Shareholder Shares

You might get shares from your employer under an Employee Shareholder agreement in exchange for some of your employment rights.

You will not have to pay Capital Gains Tax when you sell or dispose of employee shareholder shares if they were valued at up to £50,000 when you received them. If you receive shares worth more than £50,000 under an Employee Shareholder agreement the extra shares will not be exempt from Capital Gains Tax.

Employee shareholder status

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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. 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

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More useful links

Capital Gains Tax record keeping