How to calculate capital gains and losses on shares

This guide will help you calculate capital gains and losses if you sell or otherwise dispose of shares, securities and debentures in the 2013-14 tax year. There are some examples that will help you get your Capital Gains Tax right.

On this page:

Working out your capital gains or losses for 2013-14

You must work out the gain or loss separately for each type of share when you sell, give away, exchange or otherwise dispose of them. This step-by-step guide explains how to do that in straightforward cases.

If you sell or dispose of other types of assets in 2013-14, you must work out each gain or loss separately. Then you can work out your overall gains or losses.

You can find help on working out capital gains on property, personal possessions and business assets in the 'More useful links' section below.

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Step 1: Work out how much you received

The amount received for your shares is usually the sale price. This is the amount of money you received for the shares when you sold or disposed of them. However, sometimes you need to use the market value of the shares instead of the sale price. The market value is the price the shares might reasonably be expected to have fetched on a sale in the open market.

If your shares have lost all or most of their value, you may be able to make a claim that the shares are worthless or almost worthless. This is known as a 'Negligible Value Claim'. You then use the amount specified in the claim. See the link below for more on this.

Read more about worthless shares

When to use market value - some examples

You use the market value of the shares instead of the sale price if, for example:

  • You give the shares away.
  • You intentionally sell or dispose of the shares for less than they're worth.
  • You sell or dispose of the shares to a 'connected person', such as a close relative or a company you control. See the special rules below if the 'connected person' is your husband, wife or civil partner. See the link below for more on 'connected persons'.

See the glossary for more on 'connected persons'

Special rules for husbands, wives and civil partners

If you sell or give shares to your husband, wife or civil partner you usually won't have to pay any Capital Gains Tax on that disposal. You must have lived together for at least part of the tax year in which you make the disposal.

This does not apply to other people you're connected with (for example your brother).

This does not apply if you're separated for the whole of the year in which the disposal occurs. You must use the market value of the shares disposed of, at the date of disposal, as the amount received.

See more on gifts, separation and divorce

Download the latest helpsheet on husband and wife; civil partners - Helpsheet 281 (PDF 76K)

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Step 2: Work out how much the shares cost

The cost of your shares is normally the amount you paid for them when you bought or acquired them.

However, sometimes you need to use the market value of the shares instead of the cost. The market value is the price your shares might reasonably have been expected to have fetched on a sale in the open market.

See the link below if you've disposed of some but not all shares you hold of the same type and in the same company.

Selling or disposing of part of your shareholding

Using market value - some examples

You use the market value of the shares instead of the cost if:

  • You owned the shares at 31 March 1982 - you use their market value on that day.
  • They were a gift made after 31 March 1982 - you use their market value when they were given to you, unless there's been a claim for Gift Hold-Over Relief (see the link below). Or see the section below if they were a gift from a husband, wife or civil partner - special rules apply.
  • You inherited them after 31 March 1982 - you use their market value on the date of death of the person who left them to you.

Read about reliefs including Gift Hold-Over Relief

Special rules for husbands, wives and civil partners

If you received the shares from your husband, wife or civil partner when you were living together, you usually use the amount the shares cost them.

But if your husband, wife or civil partner owned the asset at 31 March 1982, you use the market value on that day instead.

Checking the market value

HM Revenue & Customs (HMRC) can check your valuation, to help you complete your Self Assessment tax return. To request this complete form CG34 Post Transaction Valuation Check after you've disposed of the shares. Form CG34 contains the address you should send it to.

Please allow at least two months for HMRC to check the valuation.

Download form CG34 Post Transaction Valuation Check (PDF 44K)

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Step 3: Work out how much you spent to buy or sell the shares

If you've spent extra money to buy or sell your shares, you can deduct certain costs.

Costs you can deduct include:

  • fees or commission for professional advice or services - for example Capital Gains Tax valuations, solicitors' and stockbrokers' fees
  • Stamp Duty

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Step 4: Work out the gain or loss so far

Example

In June 2002 you bought some shares for £50,000.

You paid £2,000 in fees to buy the shares.

In June 2013 you sold the shares for £200,000.

From the amount you sold the shares for (£200,000) take away the amount you paid for them (£50,000) along with the cost of the fees (£2,000).

So your gain before applying any reliefs is £148,000 (£200,000 - £50,000 - £2,000).

If you had sold the shares for £40,000, you would have made a loss of £12,000 instead (£40,000 - £50,000 - £2,000 costs).

Find out more about claiming a loss

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Step 5: Apply tax reliefs

If you've worked out that, so far, you've made a gain, there are tax reliefs that may reduce or postpone that gain.

For example the following reliefs may be available:

  • Entrepreneurs' Relief - if you sell or dispose of shares that count as business assets
  • Gift Hold-Over Relief - if you make a gift of shares that count as business assets

There are specific rules for your shares to count as business assets and these rules vary depending on the type of relief. See the link below for more on this.

Find out more about Capital Gains Tax reliefs on shares

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Step 6: Work out your Capital Gains Tax

Through steps 1 to 5, you've worked out the gain or loss on your shares and applied reliefs.

If you sell or dispose of other assets in 2013-14, repeat these steps to work out the separate gain or loss for each asset.

See the 'More useful links' section below for more help on:

  • working out gains and losses on other types of assets
  • when and how to claim if you've made a loss

You must:

  • work out all of your individual gains and losses, for each asset you've sold or disposed of
  • see if you have overall gains or losses to find out if you owe tax
  • work out the rates of Capital Gains Tax to apply
  • work out which gains to use your Annual Exempt Amount against

In most cases:

  1. You add together all of your gains for that tax year.
  2. You add together all of the allowable losses you've made for that tax year.
  3. You deduct the losses from the gains to work out the overall net gains or losses.
  4. If the overall net gains are below the annual tax-free allowance (known as the 'Annual Exempt Amount'), there's no Capital Gains Tax to pay.
  5. If the overall net gains are above the Annual Exempt Amount, you deduct unused allowable losses from a previous tax year. Deduct enough to reduce your gains to the Annual Exempt Amount. You can carry the rest forward to future tax years.
  6. If you have overall gains work out which Capital Gains Tax rates apply and how to use your tax free allowance. For gains made in 2013-14 Capital Gains Tax is charged at 18%, or 28% for higher rate tax payers.
  7. If you have gains chargeable at different rates, deduct the Annual Exempt Amount in the way which minimises your tax due.

Find out more about the annual tax-free allowance

Example

Mr P made gains in 2013-14 of £70,900 from disposals.

The Annual Exempt Amount for individuals for 2013-14 is £10,900.

Mr P's gains are above this amount - so he deducts the Annual Exempt Amount from his gains.

He is liable to tax on £60,000 (£70,900 - £10,900).

Mr P is a higher rate tax payer so the Capital Gains Tax rate is 28%.

He must pay Capital Gains Tax of £16,800 (£60,000 x 28%).

Look up Capital Gains Tax rates and tax-free allowances

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More useful links

Property - a step-by-step guide to working out your capital gains

Personal possessions - a step-by-step guide to working out your capital gains

Business assets - a step-by-step guide to working out your capital gains

What to do if you've made a loss

Find out how and when to report a capital gain