What is the current rate of capital gains tax on shares?

In the 2023/24 tax year, there are currently four different rates of capital gains tax in the UK. The rates differ depending on the type of asset being disposed of (property has a different CGT rate to all other chargeable assets), and also the income tax band of the individual who has accrued the capital gain.

In turn, the rate of capital gains tax on shares ranges from 10% for basic rate income taxpayers to 20% for higher and additional rate income taxpayers.

It is worth noting that this could reduce to 0% if shares are held in certain tax efficient wrappers.

Capital Gains Tax rates table

CGT is levied on any profit an individual makes by disposing of an asset. ‘Disposing of’ can include selling the asset, swapping it for something else, giving it away, or receiving compensation for it.

Some examples of assets liable for CGT in the UK (known as chargeable assets) include the following:

How is capital gains tax on shares calculated?

The exact amount of CGT due following the sale of an asset can be calculated by applying the relevant rate to the profit earned when the asset was disposed of (total revenue from gain – cost of acquiring asset).

It is also crucial to consider the CGT-free allowance. Every individual is entitled to receive a certain amount of capital gains each year without being subject to tax.

Read More: Investor roadmap: capital gains tax allowance 2023/24 and beyond

For example, let’s say an additional rate taxpayer sells listed equities in the 2023/24 tax year and makes a profit of £100,000. If this taxpayer has not already made other capital gains in the same tax year, and therefore has not used up their £6,000 CGT-free allowance, they would be subject to pay £18,800* in CGT on the equities, reducing the overall profit of the capital gain from £100,000 to £81,200.


Importantly, a capital gain of £100,000 instead earned in the 2024/25 tax year would attract more tax to be paid, simply due to the CGT-free allowance being reduced from £6,000 to £3,000.


5 routes to minimise capital gains tax on shares

The reduction in the UK’s capital gains tax allowance of over 75% in just three years not only highlights the importance of timely capital gains planning, but also the increasing value of  tax efficient investment options.

With some schemes, all returns are entirely free of capital gains tax and additional CGT benefits – such as the ability to defer the payment of existing CGT bills to later years or halve them entirely – can also be accessed.

Five of the UK’s most powerful tax efficient investment schemes for reducing capital gains tax on shares are explored in more detail below.


1. Enterprise Investment Scheme (EIS)

Introduced in 1994 to encourage investment into early stage, high-growth UK companies, the Enterprise Investment Scheme (EIS) is a Government-backed initiative that offers investors a generous range of tax incentives in return for investing into eligible companies.

These significant tax incentives can make the EIS an attractive option for investors seeking to minimise capital gains tax on shares.

Enabling investors to avoid the CGT they pay on shares entirely and defer the payment of existing CGT liabilities to later years, the EIS’s CGT-related incentives include:

While EIS investments can also offer considerable investment growth, generate positive impact, enhance portfolio diversification, and provide access to other tax incentives such as income tax relief and IHT exemption, EIS investments are typically in early-stage companies, which carry a higher level of risk compared to more established businesses.

The associated tax benefits and ability to minimise the level of CGT you would typically pay should not be the sole reason for investing in EIS shares. Investors should carefully consider the inherent value of the investment opportunity and seek professional advice to assess the suitability for their specific circumstances.

Investors should be aware that capital is at risk and returns are not guaranteed. EIS investments generally have reduced levels of liquidity, therefore EIS Investors should have a long-term investment horizon and be prepared to hold their investment for several years.


2. Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) is another Government initiative aimed at encouraging investment in early-stage UK businesses. The SEIS focuses specifically on very young, seed-stage startups and subsequently offers a more generous range of tax incentives for investors.

The SEIS provides substantial opportunities for investors to minimise their capital gains tax bill via the following forms of tax benefit:

Ultimately, the SEIS offers attractive tax incentives, enabling investors who support early-stage startups to maximise their personal capital gains tax relief on shares.

Additionally, investors can receive 50% income tax relief on the value of their SEIS investment, a more favourable tax benefit than the 30% income tax relief offered by the EIS.

Access: Free Guide to the Seed Enterprise Investment Scheme

It is important to note that SEIS investments carry inherent risks, and investors should carefully consider the investment opportunity and seek professional advice to assess the suitability for individual circumstances.


3. Individual Savings Accounts (ISAs)

Introduced by the UK government in 1999, Individual Savings Accounts (ISAs) are tax-efficient savings and investment accounts for UK residents. They act as a tax wrapper for holding various financial products, including cash, stocks and shares, and innovative finance investments.

One key benefit of ISAs is that any income or capital gains generated within the account are tax free.

There are several types of ISAs available, including Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs. Each type has its own rules and limits, but they all share the common goal of providing tax advantages to account holders.

One ISA that can be utilised to minimise capital gains tax on shares is the Stocks & Shares ISA, which can be advantageous in two main ways:

Ultimately, ISAs provide tax efficient savings and investment options for UK residents. By utilising ISAs, individuals can minimise capital gains tax on shares, benefit from tax-free growth and income, and take advantage of their annual ISA allowances.

ISAs have an annual contribution limit of £20,000, and it is worth noting that these limits, as well as other ISA regulations, are subject to change. It is crucial to be aware of these limits and plan your investments accordingly, and is always advisable to review current regulations and seek professional advice to maximise the potential of your ISA allowances.


4. Social Investment Tax Relief (SITR)

Social Investment Tax Relief (SITR) is a Government initiative designed to encourage individuals to invest in UK social enterprises. SITR offers tax incentives to investors who support businesses with a social or environmental mission, providing them with an opportunity to make a positive impact while also benefiting from potential tax savings.

SITR provides opportunities for investors to minimise capital gains tax (CGT) on shares in social enterprises via several routes:

Overall, SITR can provide tax incentives for individuals who invest in qualifying social enterprises. By utilising SITR, investors can potentially minimise their capital gains tax bill, benefit from income tax relief, and make a positive social and environmental impact.


5. Venture Capital Trusts (VCTs)

Venture Capital Trusts (VCTs) are listed investment vehicles that provide individuals with an opportunity to invest in a diversified portfolio of small, unlisted companies, also offering investors a number of tax incentives.

Introduced by the UK Government in 1995, VCTs are designed to encourage investment in small, high-risk companies. Unlike the EIS and SEIS, VCTs are managed by professional fund managers who select a portfolio of investments on behalf of the VCT shareholders (at the expense of regular additional fund fees).

VCTs offer multiple potential benefits in terms of capital gains tax (CGT) relief, including:

While VCTs provide tax advantages, they also involve risks. Investors should carefully consider their investment strategy and seek professional advice before investing in VCTs.

Read More: EIS vs VCT: which is right for your investment portfolio?

Considering the higher annual investment allowances, potential for greater capital growth, and the more generous range of tax reliefs, the EIS and SEIS generally offer more favourable options for individuals seeking to minimise CGT on shares while enjoying additional tax benefits and superior growth compared with VCTs.

It is important to note that individual circumstances may vary, and it is advisable to seek professional advice to evaluate the suitability of each scheme based on specific financial goals and risk appetite.


Utilising tax efficient investment schemes to minimise CGT on shares

Minimising capital gains tax on shares is a priority for many investors, especially as the UK tax environment becomes stricter with tightened CGT allowances. This is why the generous schemes outlined above can be highly popular with UK investors due to the attractive tax incentives available in return for investing in qualifying early-stage businesses and eligible shares.

When navigating the complexities of capital gains tax and investment strategies, seeking professional advice can be crucial as tax legislation is subject to change. Professional advisors can provide personalised guidance based on an individual’s financial goals, risk tolerance, and tax situation, as well as ensure compliance and help to maximise the available tax benefits.

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