How much capital gains tax will I pay if I sell an investment in different chunks?
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16 July 2026
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I’d like to sell an investment to reduce the capital gains tax. The first sale was for £5,000 = £2,000 (initial price) + £3,000 (the tax free allowance). For the consequent sales, is it only £3,000 each or can the initial price be used again to increase the tax free allowance to £5,000 again?
Victoria
Calculating a capital gain is easy in theory but can be trickier in practice. The basic rule is that to find the gain, you take the selling price of those specific assets and subtract the purchase price and any transaction costs. That leaves you with your capital gain.
Capital gains equation
You can then subtract the first £3,000 each tax year to take account of your annual allowance, formally known as the Annual Exempt Amount. If there’s anything left, this is the taxable portion of your gain.
You can only use your annual exemption once a year, not once per sale. And you can’t carry forward capital gains tax exemptions from previous years. However, if you have made a loss elsewhere during the year, you can offset that loss against your gain too. Unused losses can generally be carried forward, provided they are reported to HMRC within the relevant time limits.
In your case, if this is your only gain in each tax year, and there are no losses to offset, if you paid £2,000 for this first tranche of shares and are selling them for £5,000, then after subtracting the £3,000 annual exemption, there’s no tax to pay. When you sell the next group in the next tax year, you’ll have another £3,000 annual exemption, and can also subtract whatever that portion cost you.
If you paid £2,000 overall for the assets, then you will need to go back to your calculations and work out what you paid for the specific portion that you sold. You can only subtract the purchase price of the assets in that first tranche. Then in the coming year, you’ll be able to subtract the purchase price of the second portion, as well as the new annual exemption of £3,000.
If this leaves you with a tax bill in the current tax year, don’t forget you can subtract transaction costs too.
Be mindful of add-ons over time
One common issue people run into is where they’ve added to investments over time and they don’t know what purchase price to use. If you buy the same class of share in the same company, this is classed as a section 104 holding, so when working out what you bought it for, you can use the average cost per share for the whole holding.
Understanding your CGT bill
If you have a capital gains tax bill, the rate you pay on it will depend on what you earn elsewhere.
If you’re a higher rate or additional rate taxpayer selling shares or funds, you pay 24% on your taxable gain. If you’re a basic rate taxpayer, you need to add the taxable bit of your gain to your income for the year. If the total comes in below the higher rate threshold, you pay 18% on it all.
If the total pushes you over the higher rate threshold, you pay 18% on the slice below the threshold and 24% on the slice above it.
If you have income of £45,270 for example and a gain of £13,000, you would subtract the annual exemption of £3,000, then you’d pay 18% on the first £5,000 and 24% on the other £5,000.
It’s worth knowing that you don’t just pay capital gains tax when you sell an asset. You might also pay it when you give assets away to anyone other than a spouse or civil partner, if you exchange assets with anyone, or if you sell, exchange or spend cryptocurrency.
As we said up top, capital gains tax isn’t straightforward to calculate, and because you need to tell HMRC about it, there’s also admin to get through before you can pay a bill. Given the fact that there could be capital gains any time you buy or sell any asset, it adds an extra layer of legwork to managing a portfolio and regularly rebalancing it outside of a tax wrapper.
However, when you hold stocks and shares within an ISA wrapper, you don’t have to worry about capital gains tax at all on those assets - whether you’re tweaking the portfolio or cashing it in entirely. It’s also free of dividend tax, saving you another source of potential cost and admin.
Sarah Coles: Head of Personal Finance
Sarah Coles is AJ Bell’s Head of Personal Finance. She’s passionate about helping people get to grips with their money, so they have more freedom to do the things that really matter to them in...
