Do I pay CGT if I sell shares in my ISA?

undefined ISAs provide a tax-free wrapper: no CGT, no income tax on dividends, no tax on interest. The annual ISA allowance is £20,000 for 2025-26. If you hold shares outside an ISA with significant unrealised gains, you can't simply transfer them in — you must sell and rebuy within the ISA (a 'bed-and-ISA' transaction). This crystallises the gain for CGT purposes on the sale, but the reacquired shares within the ISA will be free from future CGT. Relevant legislation: ISA Regs 1998 reg.4 (no CGT within ISA). TCGA 1992 s.135 (transfers into ISA are treated as disposals at market value).. Example: A client with £30,000 of shares outside an ISA (cost £10,000, current value £30,000) sold and immediately repurchased them within an ISA. The £20,000 gain was covered by the annual exemption and carried-forward losses. The shares are now in an ISA — all future growth is CGT-free. Common mistake: Thinking you can transfer shares directly into an ISA without selling. You can't — you must sell first (triggering CGT) then buy within the ISA. However, if the gain is within your annual exemption, there's no CGT on the sale.

How is CGT calculated on EMI option shares?

undefined EMI options have a unique tax treatment. On exercise, if the exercise price equals the market value at the date of grant (which is typical when HMRC Advance Assurance has been obtained), there's no income tax or NIC on exercise. The entire growth from the grant-date market value to the sale price is a capital gain. EMI shares can qualify for BADR after just 1 year of holding the exercised shares (reduced from the normal 2-year holding period). This means EMI share gains can be taxed at 18% — exceptionally favourable. Relevant legislation: ITEPA 2003 Sch.5 (EMI); TCGA 1992 s.169I(6)(baa) — EMI shares qualify for BADR after 1 year (not 2).. Example: An employee exercised EMI options at the HMRC-agreed market value of £2/share. The shares were sold 18 months later for £10/share. The entire £8/share gain is a capital gain qualifying for BADR at 18% (since 18 months > 1 year EMI holding period). Without EMI, it would be 24%. Common mistake: Not realising that EMI shares have a reduced 1-year BADR holding period (not the standard 2 years). Many employees hold EMI shares for 2+ years unnecessarily, missing investment opportunities. Conversely, selling within 1 year of exercise means no BADR — the full 24% rate applies.

Tax Advisory

Capital Gains Tax on Shares in the UK

CGT rates, reliefs and planning strategies for selling shares, including listed shares, unquoted shares and employee share scheme disposals.

Quick Answer

When you sell shares, CGT applies at 18% (basic rate) or 24% (higher rate) on the gain, after deducting the £3,000 annual exemption. The exact CGT depends on the matching rules (which shares you're deemed to have sold), whether BADR applies (for qualifying business shares), and whether you can offset losses. Shares held within ISAs, SIPPs or EIS/SEIS schemes have special CGT treatment. Planning before the disposal is essential.

CGT Rates on Shares (2026-27)

Shares held outside tax-advantaged wrappers are subject to CGT on disposal at 18% (basic rate taxpayers) or 24% (higher/additional rate taxpayers). The annual exempt amount is £3,000 for 2026-27 (down from £6,000 in 2023-24 and £12,300 before that).

The reduced annual exemption means more share disposals are caught within the CGT net. Effective planning to use the annual exemption each year is more important than ever.

Share Matching Rules (Section 104 Pool)

When you sell some but not all of your shares in a company, HMRC uses 'matching rules' to determine which shares you've sold. This affects the gain calculation. The order of matching is:

1. Shares acquired on the same day as the disposal
2. Shares acquired within the 30 days following the disposal (the 'bed-and-breakfast' rule)
3. Shares in the 'Section 104 pool' — all earlier acquisitions averaged together
If you have EMI options exercised at different times, each tranche may have its own cost basis

Planning Strategies for Share CGT

Key strategies to minimise CGT on share disposals include:

Bed-and-ISA: sell shares and immediately rebuy them within an ISA wrapper (shields future gains)
Bed-and-SIPP: sell shares and reinvest within a SIPP (tax relief on contribution plus CGT-free growth)
Transfer shares to a spouse before selling (tax-free transfer, uses spouse's annual exemption)
Harvest losses: sell loss-making investments to crystallise losses, then reinvest in similar (but not identical) assets
EIS/SEIS reinvestment relief: defer CGT by reinvesting gains in qualifying EIS/SEIS shares
BADR on qualifying unquoted trading company shares: 18% rate up to £1M (was 10% before April 2025)
Timing disposals across tax years to use two annual exemptions

Relevant Legislation

TCGA 1992 — full CGT framework. Share matching rules: TCGA 1992 s.104-106. BED-and-ISA: ISA Regs 1998. EIS CGT deferral: TCGA 1992 s.150. BADR: TCGA 1992 s.169I.

Practical Example

A client selling £50,000 of listed shares with a £20,000 gain faced CGT of £4,080 (£17,000 at 24%). By selling half before 5 April and half after, using two annual exemptions (£6,000 total), the CGT was eliminated entirely. We also used a bed-and-ISA transaction to shield the reinvested shares from future CGT.

Common Mistake

Selling all shares in one tax year instead of spreading across two. With the reduced annual exemption, the difference between selling in one year vs. two can be significant. Another mistake is not reporting losses — if you sell shares at a loss, report it on your Self Assessment so the loss is officially 'crystallised' and can be carried forward indefinitely against future gains.

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