Tax on the sale of shares

If you make total 'gains' (profits) above a certain level when you dispose of assets, including shares, you may have to pay Capital Gains Tax (CGT). Special rules apply for identifying shares acquired in the same company at different times - to ensure you work out the correct gain or loss.

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Working out whether you have to pay CGT

Whether or not you need to pay CGT when you dispose of shares depends on your total gains for the tax year. This includes the gain on the shares and gains on the disposal of any other assets that attract CGT.

CGT is charged on total gains after:

  • deduction of the costs of acquisition and disposal of each asset
  • taking into account any reliefs that affect the amount of a gain - some apply automatically others have to be claimed
  • deduction of allowable losses arising from the disposal of other shares or assets
  • deducting from the total taxable gains left the 'Annual Exempt Amount' - for the tax year 2013 to 2014 this is £10,900. It is expected to change to £11,000 for 2014 to 2015 when Royal Assent is given in July 2014.

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How much CGT will you pay?

This depends on your overall income.

To find out how to calculate CGT and check which other assets attract CGT read the related article by following the link below.

Capital Gains Tax: the basics

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Special rules for working out gains on shares

Shares differ from most other assets that attract CGT because they're not uniquely identifiable. You may buy shares of the same class in one company at different times and at different prices. As a result you have to apply special rules when working out their acquisition cost for CGT purposes.

Find out more about shares and CGT

Shares through an employee share scheme or as an employee shareholder

Special CGT rules apply to shares bought or acquired through an employee share scheme or as a result of your employment. HM Revenue & Customs (HMRC) approved schemes, such as Share Incentive Plans, approved Save As You Earn schemes, Company Share Option Plans and Enterprise Management Incentives offer tax advantages. If you receive shares from your employer and become an employee shareholder there are also tax advantages and special CGT rules. If you follow the rules, you may pay less or no CGT when you sell the shares.

Download Help Sheet 287 on Employee Share Schemes and CGT (PDF 64K)

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Reporting the sale of shares and paying CGT

If you normally complete a Self Assessment tax return

You must fill in the CGT pages of your return if any of the following apply:

  • CGT is due
  • you wish to claim an allowable loss or make any other capital gains claims or election
  • the total value of all your disposals that attract CGT is above four times the Annual Exempt Amount - whether or not you made gains
  • you deduct losses and your gains before deducting losses are greater than the Annual Exempt Amount
  • no losses are deducted, but your gains are more than the Annual Exempt Amount
  • you are 'not domiciled' in the UK and are claiming to be taxed on the 'remittance basis' and you have foreign gains that you have brought to the UK

If you do not tell HMRC in time about gains that should be included on your tax return you may have to pay a penalty.

You can find out more about the forms you'll need and how to file your tax return online or on paper by following the link below.

How to report a capital gain

If you don't normally complete a tax return but CGT is due

If you have worked out that you do have CGT to pay, you need to report this to HMRC by sending a tax return. You must register for Self Assessment before you can do this. The latest you can register is by 5 October after the end of the tax year for which you need a tax return. You may have to pay a penalty if you do not tell HMRC in time that you have CGT to pay.

Download a Self Assessment registration form (PDF 166K)

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Selling or giving away shares

Giving away shares or selling them for less than they're worth

If you give shares away - so you get nothing for them - your gain is based on what they're worth. It is the same if you choose to sell them for less than their full value. So you need to work out the gain based on the full value of the shares when you gave them away.

Selling or giving shares to a connected person

If you sell or give the shares to a 'connected person', such as a close relative or a company you control your gain is based on what they're worth - which is the full value of the shares when you sold or gave them away. But see the next section if the person you're connected to is a husband, wife or civil partner and follow the link below for more on 'connected persons'.

More on connected persons

Selling or giving shares to your spouse, civil partner or children

You don't have to pay CGT if you sell or give shares to your husband, wife or civil partner while you're legally married or in a civil partnership and living together. But if they later sell or give away the shares, they may have to pay CGT on the gain - based on their original cost to you.

There's no special relief if you sell or give shares to your children.

More about civil partnerships from the Department of culture, media and sports website (Opens new window)

Download Helpsheet 281 Husband and wife, civil partners, divorce, dissolution and separation (2012 to 2013) (PDF 75K)

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More useful links

Find out more about tax returns

Do you need to fill in a tax return?

How to file your tax return online

Download Help Sheet 284 on Shares and CGT (PDF 72K)

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