Key takeaways
- Gains on shares and funds held outside ISAs and pensions are taxed at 18% or 24% above the £3,000 annual exempt amount.
- Shares are matched in a set order: same-day purchases, then purchases in the next 30 days, then the section 104 pool at average cost.
- For accumulation units in funds, reinvested income adds to your base cost, so record it to avoid paying tax twice.
- Switching between share classes of the same fund is not usually a disposal; selling one fund to buy another is.
- Bed and ISA lets you move investments into an ISA each year, using the annual exempt amount on the way.
Shares and investment funds held outside a tax wrapper are one of the most common sources of Capital Gains Tax (CGT), especially since the annual exempt amount fell to £3,000. The calculations have a few quirks, notably the rules for matching sales with purchases. This guide covers shares, unit trusts and OEICs.
What is taxed and when
You make a disposal when you sell, give away (other than to a spouse or charity) or exchange shares or fund units. The gain is the sale proceeds less the allowable cost and dealing costs.
| Held in | CGT |
|---|---|
| Stocks and shares ISA | None |
| Pension (SIPP, workplace pension) | None |
| General investment account or direct shareholding | Yes, above £3,000 |
| Shares acquired through an approved employee scheme (SIP, SAYE, CSOP, EMI) | Special rules, often reduced or none |
Gains are taxed at 18% within your remaining basic rate band and 24% above it.
The share matching rules
When you have bought the same company’s shares at different times, sales are matched with purchases in this order:
- Same day: shares bought on the same day as the sale
- Next 30 days: shares bought in the 30 days after the sale (the “bed and breakfast” rule)
- Section 104 pool: all other shares, at their average cost
The 30-day rule stops investors selling to crystallise a gain or loss and buying straight back. If you buy back within 30 days, the sale is matched with the new purchase, not your original holding.
Example: the section 104 pool
Tom built up a holding in one company:
| Date | Transaction | Shares | Cost | Pool |
|---|---|---|---|---|
| 2018 | Bought | 2,000 | £8,000 | 2,000 shares, £8,000 |
| 2021 | Bought | 1,000 | £6,000 | 3,000 shares, £14,000 |
| 2026 | Sold 1,500 for £15,000 | (1,500) | (£7,000 average cost) | 1,500 shares, £7,000 |
Gain: £15,000 − £7,000 = £8,000, less dealing costs and the £3,000 annual exempt amount.
Unit trusts and OEICs
Funds such as unit trusts and open-ended investment companies (OEICs) are taxed like shares, with a few extra points.
Accumulation units
With accumulation units, income is reinvested in the fund rather than paid out, but it is still taxable income each year as a “notional distribution”. Because you have already been taxed on it, the reinvested amount is added to your base cost for CGT. Keep your annual tax vouchers or consolidated tax certificates, or you risk paying CGT on income that was already taxed.
Equalisation
The first distribution after you buy units in a fund may include an equalisation payment, a return of part of the price you paid. It is not taxable as income but is deducted from your base cost.
Switching
- Converting between share classes of the same fund, for example from a fee-bearing to a lower-fee class, is not usually a disposal for CGT.
- Selling one fund to buy another is a disposal, even on the same platform.
Offshore funds
Gains on offshore funds without reporting fund status are taxed as income, not as capital gains, at your Income Tax rates. Most offshore funds marketed to UK investors have reporting status, but check before you invest.
Reliefs and allowances
- Annual exempt amount: £3,000 a year; spouses each have their own.
- Spouse transfers: no gain, no loss, so shares can be moved to a spouse with an unused allowance or lower tax rate before sale.
- EIS and SEIS: gains on qualifying shares held for at least three years can be exempt.
- Business Asset Disposal Relief: 18% for qualifying holdings in your own trading company; see BADR.
- Gifts to charity: no CGT, plus Income Tax relief on the value of listed shares given.
Losses
Losses on shares can be set against other gains in the same year and carried forward. If a company fails and its shares become worthless, you can make a negligible value claim to treat them as sold, crystallising the loss. Losses on shares in unquoted trading companies you subscribed for may be set against income instead. See CGT loss relief.
Bed and ISA
You can sell investments held outside an ISA and immediately buy them back inside one, up to the £20,000 annual ISA allowance. The sale is a disposal for CGT, so it makes sense to realise gains up to the £3,000 exempt amount each year. Because the repurchase is inside an ISA, the 30-day rule does not apply to it. See ISA tax benefits.
Reporting
Report gains on your Self Assessment return if they exceed £3,000, or if you are in Self Assessment and total sale proceeds exceeded £50,000. If you are not in Self Assessment, use HMRC’s real-time CGT service. See reporting and paying CGT.
Frequently asked questions
How much CGT do I pay on shares?
18% on gains within your remaining basic rate band and 24% above it, after the £3,000 annual exempt amount.
What is the 30-day rule for shares?
If you buy the same shares within 30 days after selling them, the sale is matched with the new purchase for CGT, rather than with shares you held before.
Do I pay CGT on accumulation units?
Yes, when you sell them, but the income reinvested each year is added to your cost, reducing the gain.
Is switching fund share classes a disposal?
Usually not, if it is a conversion within the same fund. Selling one fund to buy another is a disposal.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.