Calculating Capital Gains Tax (CGT) on shares can get a little complex at times, but it doesn’t have to be that complicated. We’ll break down the capital gains tax rate in the UK and some possible exemptions.
Capital Gains Tax Rates in the UK
The 2021/22 and 2022/23 capital gains tax rate depends on what income tax bracket you fall into:
- For basic-rate taxpayers (if your annual income is below £50,270), the capital gains tax rate on shares is 10%
- For higher-rate taxpayers (if your annual income is above £50,270), the capital gains tax rate on shares is 20%
In other words, it breaks down like this:
| Type of Asset | Basic Rate | Higher Rate |
| Shares | 10% | 20% |
| Residential Property | 18% | 28% |
| Cryptocurrency | 10% | 20% |
| Other | 10% | 20% |
Be aware that if you are a basic-rate taxpayer and you make a gain that is large enough to put into a higher-rate band, then you’ll pay the higher rate on this part of the gain.
Capital Gains Tax Allowance
Individual investors have a £12,300 for the 2022/23 tax year, unchanged from the previous 2021/2022 tax year. That essentially means that your capital gains are free up to the £12,300 mark, where you’d then start paying CGT.
RELATED: CGT Share Matching Rules: What is the 30-Day Rule?
Capital Gains Tax Exemptions
Let’s look at exemptions. That is, situations and types of security that are not liable to capital gains tax. Here is a list of some common areas:
- Government securities e.g. gilts
- Qualifying corporate bonds – broadly, interest-based corporate loan stocks, excluding convertibles
- Venture capital trusts (subject to conditions)
- Enterprise investment schemes (subject to conditions)
- Gifts to charity
- ISAs
- Transfers between spouses
Apart from these, the disposal of shares and other securities will in general give rise to a potential capital gains tax liability, or an allowable loss. A disposal does not necessarily mean a market sale. Gifting the shares in general to any person other than a spouse is deemed to be a disposal at market value, whatever the amount of money changing hands.
Disposals of shares where new securities are received in exchange for the shares are not treated as disposals for CGT purposes. This happens often in takeovers and company reorganisations.
In such a case you are deemed to hold the new paper at the original cost of the old paper. No CGT disposal occurs until you sell the new shares for cash. If all cash is received in the deal, though, this is like any other sale for CGT purposes. If, as sometimes happens, it is a mixed cash and paper deal then there may be a partial CGT disposal or, if the cash element is small, then it is not treated as a sale but as a reduction of cost.
Learn more in our Guide to Avoiding Capital Gains Tax on Shares
How to calculate net gains
Net gains means profits minus losses made in that tax year, after deducting all other reliefs that may be available (such as losses brought forward from previous years).
Following on from that, net losses in a year can be carried forward indefinitely and will be set against gains as they arise in future. The personal exemption is given for each tax year alone, and cannot be carried forward.
Every person, including minors, is exempt from CGT on the first slice of their net gains in any tax year – up to a figure called the ‘personal exemption’. Again, for the 2022/23 tax year, it’s £12,300.
