Capital Gains Tax and Share Price Matching

When you buy and sell assets such as shares and investment property, when you come to sell those assets at a profit, the gain, after any unused capital gains tax allowance, is subject to capital gains tax.

Capital gains tax (CGT) has undergone some significant changes over the last few years.  Just a few years ago, our individual capital gains tax annual allowance stood at £12,300 pa.

This was reduced to £6,000 is 2023/24 and reduced again in 2024/25 to just £3,000 pa.

Fears for More CGT Hikes

There are fears that in the coming Autumn Budget 2025 (or indeed subsequent ones to follow), the CGT allowance will be reduced further or even move to £0.  In addition,  there are the same fears that capital gains tax rates will be increased from 18% (gains within basic rate income tax band) and 24% (gains in the higher rate tax threshold and above).

Many investors are therefore looking to use their CGT allowances sooner rather than later in addition to perhaps disposing of even greater gains given tax rates may increase.

Disposing of one property or one tranche of shares is not a problem when it comes to working out your taxable gain.

• What if you have bought multiple tranches of shares in the same company at different times?
• What share prices do you use?
• Which tranche of shares are you going to sell?  Where they the ones you bought 10 years ago or the shares in the same company you bought 3 years ago, when share prices were higher?

Some people may try and suggest they have sold the shares (in the same company) they bought 3 years ago at a higher price, meaning the gain made today is smaller and therefore the capital gains tax liability will be smaller.

This used to happen frequently under something called ‘Bed and Breakfasting’, where you would dispose of shares with your capital gains tax allowance and buy them back the next day, meaning not CGT was payable and you had rebased you acquisition price of the shares.  This happened frequently until new rules were introduced.

Share Matching for Multiple Holdings of Same Shares

HMRC has a system to stop investors manipulating the share prices used when they sell/dispose of shares that they have multiple holdings and different times that they bought/acquired the shares.  This is known as ‘Share Matching’ under a 104 holding.

Old CGT Calculation:  Buy/Acquire shares at Acquisition Cost, sell/dispose of shares at Disposal Price.

New CGT Calculation:  For ‘share matching’, where you hold multiple shares in the same company, acquired at different times, you must follow the following stages:

• Stage 1 – Use share price when shares bought and sold immediately or as part of share trading (same day rule) or bought/sold within 30 days, no need to ‘share match’.  Any excess shares held for 30 days + are added to the 104 pooled shareholdings.
• Stage 2 – 104 pooled shareholdings.
• Work out the average price paid for each share – this is the acquisition price to be used when selling ‘same asset class’ shares.
• Deduct this from the share price disposal price.  This is the gain.
• Deduct any unused capital gains tax allowance.
• This is the taxable capital gain subject to capital gains tax rates for that year.

Fundamentally, ‘Bed and Breakfasting’ is now defunct unless identifiable shares were bought and sold within 30 days.  Bed and ISA still exists as you are then moving the shares into an ISA that is tax free anyway when you dispose of the shares at a later date but the ‘bed and breakfast 30 day rule’ still applies at the point of disposing of the shares before moving into ISA.

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