What is capital gains tax?
Capital gains tax — CGT — is the tax on the profit you make when you sell shares, ETFs or funds held outside an ISA or pension. In 2026/27 the first £3,000 of gains a year are tax-free (the annual exempt amount); above that you pay 18 % if you are a basic-rate taxpayer and 24 % if you pay higher or additional rate. Nothing is taxed while you simply hold a share. Inside a Stocks and Shares ISA there is no CGT at all.
One red dot: the tax only comes on the day you sell.
How it works
- Only when you sell. A share that rises 40 % but stays in your account is not taxed. The gain becomes taxable in the tax year (6 April to 5 April) in which you sell.
- £3,000 a year free. Add up all your gains in the year, subtract your losses, and only the amount above £3,000 is taxed. The exemption cannot be carried forward — use it or lose it.
- Which rate? The gain is added on top of your income: the part that falls within the basic-rate band is taxed at 18 %, the rest at 24 %.
- You report it yourself. Nothing is withheld. Gains above the exemption — or sales totalling more than £50,000 — go on your Self Assessment return, or through HMRC's "real time" CGT service. Losses only count if you report them to HMRC, within four years.
- Same shares, 30-day rule. If you sell and buy the same shares back within 30 days, HMRC matches the sale to the new purchase — so you cannot "realise" a loss just to use it.
The worked example
You buy shares for £5,000 and sell them three years later for £8,000. Gain: £3,000 — exactly the annual exempt amount, so £0 tax if you had no other gains that year.
Sell with a £10,000 gain instead: £10,000 − £3,000 = £7,000 taxable. As a basic-rate taxpayer: 7,000 × 18 % = £1,260. As a higher-rate taxpayer: 7,000 × 24 % = £1,680. Broker commission and stamp duty on the purchase are deducted from the gain first.
What else to know
Shares versus funds. Shares, ETFs and most funds are all taxed as capital gains — the UK has no special ETF regime. Spouses. Shares can be given to a spouse or civil partner without tax, so a couple has two £3,000 exemptions. Section 104 pooling. If you bought the same share several times, HMRC averages your purchase prices into one "pool" — the gain is the sale price minus the average cost. The easy way round it all: hold the shares in a Stocks and Shares ISA, and none of this page applies.
The typical beginner's mistake
Selling a big winner in March with a gain far above £3,000 — when selling half before 5 April and half after would have used two years' exemptions. Kiggo does not tell you when to sell; it just shows the gain.
How you see it in Kiggo
Kiggo's portfolio shows the gain and loss on each share — that is the number CGT is worked out on the day you sell (Kiggo does not know whether the shares sit in an ISA). In the Glossary, capital gains tax has a small drawing: one red dot on the day of the sale. Kiggo does not calculate your tax; your broker's tax statement and HMRC do that.
Related terms
Frequently asked questions
How much is capital gains tax on shares in 2026/27?
18 % for basic-rate taxpayers and 24 % for higher and additional rate, on gains above the £3,000 annual exempt amount. The rates rose from 10 % and 20 % on 30 October 2024. Inside an ISA the rate is zero.
Do I pay CGT on shares I have not sold?
No. There is no tax for holding shares or for them going up. Only a sale (or a gift to someone other than your spouse) triggers it.
Do I have to tell HMRC if my gains are under £3,000?
Not unless you are already filing Self Assessment and your total sales in the year were over £50,000. Losses you want to use later must be reported within four years, even in a year with no tax to pay.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-07.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
