How are shares taxed in the UK?

Capital gains tax on shares

Capital gains tax is payable on the profit you make when you sell shares held outside an ISA or SIPP. CGT is charged only on the gain — the difference between your purchase price and your sale price, after allowable costs — not on the full sale proceeds.

The annual CGT allowance for 2025/26 and 2026/27 is £3,000. This is the amount of net gains you can realise tax-free each year. The allowance was £12,300 as recently as 2022/23, falling to £6,000 in 2023/24 and £3,000 in 2024/25, where it has remained.

Current CGT rates on shares (from 30 October 2024):

• 18% for basic rate taxpayers
• 24% for higher and additional rate taxpayers

Your capital gains are stacked on top of your income to determine which rate applies. Capital losses on shares can be offset against other capital gains in the same tax year, or carried forward indefinitely to offset future gains.

Dividend tax on shares

Dividend income from shares held outside an ISA is taxable above the annual dividend allowance. For 2025/26 and 2026/27, the dividend allowance is £500.

From April 2026, dividend tax rates increased:

• 10.75% for basic rate taxpayers (up from 8.75%)
• 35.75% for higher rate taxpayers (up from 33.75%)
• 39.35% for additional rate taxpayers (unchanged)

Dividends are taxed as the top slice of income. Dividends received within an ISA are entirely free from dividend tax, regardless of amount. Dividends from US-listed shares are subject to a 30% US withholding tax, reduced to 15% for UK investors who have completed a W-8BEN form.

Stamp duty on shares

Stamp Duty reserve tax (SDRT) of 0.5% applies to electronic purchases of UK-listed shares. It is automatically deducted by your broker at the point of purchase and passed to HMRC.

Key points:

• Stamp duty applies to UK-listed shares only — US shares, most ETFs and most investment trusts are exempt
• It applies even to purchases within an ISA or SIPP
• No charge on transactions below £1,000 via paper

The Section 104 pool and matching rules

When you own multiple purchases of the same share, HMRC uses the Section 104 pool method to calculate the cost base for CGT purposes. Rather than matching specific lots, all purchases of the same share are pooled together at an average cost per share.

The two important exceptions to pooling are:

• The Same-Day Rule: if you buy and sell shares on the same day, the sale is matched against the same-day purchase first
• The 30-Day Rule (Bed and Breakfast Rule): if you sell shares and buy back the same shares within 30 days, the sale is matched against the repurchase, not the pool. This prevents investors from crystallising a loss while maintaining their position.

How to reduce your tax bill on shares

1. Use your ISA allowance
2. Use your SIPP
3. Spread disposals across tax years
4. Use both spouses' allowances
5. Offset losses

Use your ISA allowance

The stocks and shares ISA is the single most effective tax shelter available to UK shareholders. All gains, dividends and income within an ISA are free from CGT and income tax, up to the £20,000 annual allowance. From April 2027, the cash ISA allowance reduces to £12,000 for under-65s, making the stocks and shares ISA increasingly the primary vehicle for the full £20,000 allowance.

Use your SIPP

Gains within a SIPP are free from CGT, and pension contributions attract tax relief.

Spread disposals across tax years

Each year's £3,000 CGT allowance is use-it-or-lose-it. Spreading large positions across multiple tax years can reduce the total tax payable.

Use both spouses' allowances

Transfers between spouses and civil partners are not CGT events. A couple can effectively use £6,000 of annual CGT allowance and £1,000 of dividend allowance between them.

Offset losses

Keep records of all losing positions and use them to offset gains in the same year.

Reporting share taxes to HMRC

CGT on shares must be reported through self-assessment (SA108 form) if your net gains exceed the £3,000 annual allowance, or if your total disposal proceeds exceed £12,000 in the tax year. The online self-assessment deadline is 31 January following the end of the relevant tax year.

Dividend income above £500 must be reported if you receive a self-assessment notice, or if your total dividend income exceeds £10,000. From April 2026, Making Tax Digital for Income Tax applies to self-employed individuals and landlords with income above £50,000.

How to invest in shares tax-efficiently with us

With us, you can invest in shares through our share dealing account, stocks and shares ISA, or SIPP. Our ISA and SIPP provide the most tax-efficient routes for long-term shareholders — all gains and dividends within these wrappers are free from CGT and income tax.

For investors who want to take a view on share price movements without owning shares outright, spread bets are free from CGT and stamp duty for most UK retail traders. CFDs are subject to CGT but losses can be offset against other gains.

UK shares are available from £3 commission per trade through our share dealing account, and US shares are commission-free online.

For more detail on the tax framework, see our guides on capital gains tax on trading and investing, day trading tax, and how spread bets and CFDs are taxed.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invest.