Certain Capital Gains Tax (CGT) reliefs are available when selling shares in private trading companies (not covered in this article) but CGT is also applied when selling shares in companies listed on the stock exchange which are generally held for investment purposes.
CGT is generally applied at a flat rate of 20% when you sell shares, unless the shares are held in a CGT-exempt investment such as an ISA or a qualifying pension. The taxable gain is typically the difference between the purchase price of your shares and the amount you receive when you sell them.
What are the rules?
There are specific rules for calculating the cost of your shares if you sell:
- Shares bought at different times and prices within one company
- Shares purchased through an investment club
- Shares involved in a company merger or takeover
- Shares acquired through an employee share scheme
If you are a basic rate taxpayer and make a small capital gain, you may only be subject to a reduced CGT rate of 10%. Once your combined taxable income and gains exceed the higher rate threshold, the excess is taxed at 20% CGT. There is also an annual CGT exemption; for the 2024-25 tax year, you can make up to £3,000 in gains without paying any CGT, reduced from £6,000 in the 2023-24 tax year. This exemption applies individually to each member of a married couple or civil partnership.
Standard deadline
The standard deadline for paying any CGT owed to HMRC on the sale of shares is 31st January following the end of the tax year in which the gain was realised. Therefore, CGT for any gains realised before 6 April 2025, must be paid by 31 January 2026.
To report a gain on the sale of shares, you typically complete the relevant sections of your Self-Assessment tax return for the tax year in which the gain was made. When calculating your gain, you can deduct certain costs associated with buying or selling shares, such as stockbrokers’ fees or Stamp Duty Reserve Tax.
CB Reid are experienced in calculating capital gains tax, ensuring that any available exemptions and reliefs are claimed. We can advise on the most tax efficient way of holding assets. Whether you are a personal tax client with ongoing needs or have a one-off transaction requiring advice we are happy to help. If you have any questions or need advice on how this may affect you, please get in touch with one of the team.