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 and losses on shares

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How to calculate capital gains and losses on shares

How to calculate capital gains and losses on shares

This step-by-step guide will help you calculate capital gains and losses if you sell or otherwise dispose of shares, securities and debentures for the 2008-09 tax year. There are some easy to understand examples that will help you get your Capital Gains Tax right.

On this page:

Working out your capital gains or losses for 2008-09
Step 1: Work out how much you received
Step 2: Work out how much the shares cost
Step 3: Work out how much you spent to buy or sell the shares
Step 4: Work out the gain or loss so far
Step 5: Apply tax reliefs
Step 6: Work out your Capital Gains Tax bill
If you sold your shares before 6 April 2008
More useful links

Working out your capital gains or losses for 2008-09

You have to 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 2008-09, you must work out each gain or loss separately too, before you can work out your overall gain or loss.

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

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Step 1: Work out how much you received

The amount received for your shares is usually the sale price, eg 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 (the price the shares might reasonably be expected to have fetched on a sale in the open market) instead of the sale price.

And sometimes, if your shares have lost all or most of their value, you may make a claim that the shares are worthless or almost worthless (known as a 'Negligible Value Claim') - you then use the amount specified in the claim. See the link below for more on this.

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. But see the special rules below if the person you're connected with is a husband, wife or civil partner and the link below for more on 'connected persons'

See the glossary for more on 'connected persons'

Special rules for husbands, wives and civil partners

Your husband, wife or civil partner is a person you're connected with. But unlike other people you're connected with (eg your brother), if you sell or dispose of shares to them 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.

If you're separated for the whole of the year in which the disposal occurs, you must work out the gain or loss and 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 help sheet on husband and wife; civil partners - Help Sheet 281 (PDF 66K)

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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 (the price your shares might reasonably have been expected to have fetched on a sale in the open market) instead of the cost.

If you've disposed of some but not all shares (what's known as a 'part-disposal') out of a holding of shares (that is shares of the same type and in the same company), please see the link below.

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 - 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 - 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.

If your husband, wife or civil partner originally acquired the asset before 6 April 1998 and transferred it to you before 6 April 2008, you may be entitled to Indexation Allowance. This takes inflation into account and may reduce your tax bill.

Checking the market value

If you want HM Revenue & Customs (HMRC) to check your valuation, to help you complete your Self Assessment tax return, you should complete and send form CG34 Post Transaction Valuation Check to your Tax Office after you've disposed of the shares.

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

Go to form CG34 Post Transaction Valuation Check

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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

You now need to work out the gain or loss on the shares so far.

Example

In June 1999 you bought some shares for £50,000.

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

In June 2008 you sold the shares for £200,000.

To work out the gain or loss, take the amount you sold the shares for (£200,000) and subtract the amount you paid for them (£50,000) along with the cost of the fees (£2,000).

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

If you'd sold the shares for £80,000, you'd have made a loss of £5,000 instead (£80,000 - £85,000 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 bill

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 2008-09, you must 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 and for guidance on when and how to claim if you've made a loss.

Once you've worked out all of your individual gains and losses, for each asset you've sold or disposed of - you'll need to work out the overall gain or loss to see the tax due.

In most cases:

You add together all of your gains for that tax year.
You add together all of the allowable losses you've made for that tax year.
You deduct the losses 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.
If the overall gain is above the Annual Exempt Amount, you can deduct unused allowable losses from a previous tax year to reduce your gains to the Annual Exempt Amount. You can carry the rest forward to future tax 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 a loss - check out the time limits for claiming it - see the 'More useful links' section below.

Find out more about the annual tax-free allowance

Example

Mr P's total gains in the 2008-09 tax year are £70,600.

The Annual Exempt Amount for individuals for 2008-09 is £9,600.

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

He is liable to tax on £61,000 (£70,600 - £9,600 = £61,000). The Capital Gains Tax rate is 18%. He must pay Capital Gains Tax of £10,980 (£61,000 x 18% = £10,980).

Look up Capital Gains Tax rates and tax-free allowances

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If you sold your shares before 6 April 2008

Different rules applied if you sold or disposed of shares before 6 April 2008.

Work out your capital gains on shares sold in 2007-08

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