How do I calculate the gain on a disposal of shares?
Answered 11 March 2026
Calculating the Gain on a Disposal of Shares
What the law says
The fundamental rule for computing a chargeable gain on any asset disposal (including shares) is set out in TCGA 1992 s.15: "The amount of the gains accruing on the disposal of assets shall be computed in accordance with this Part… Every gain shall, except as otherwise expressly provided, be a chargeable gain."
The basic computation is: Disposal proceeds minus allowable deductions = Gain. Under TCGA 1992 s.38, the sums allowable as deductions are restricted to:
- (a) The amount or value of the consideration given wholly and exclusively for the acquisition of the shares, together with incidental costs of acquisition (e.g. fees, commission, stamp duty);
- (b) Expenditure wholly and exclusively incurred for the purpose of enhancing the value of the asset, being expenditure reflected in the state or nature of the asset at the time of disposal, and any expenditure in establishing, preserving or defending title;
- (c) The incidental costs of making the disposal (e.g. professional fees, costs of advertising to find a buyer, valuation costs).
Interest payments are not allowable under s.38 (except as provided by s.40).
Capital gains tax is then charged on the total chargeable gains accruing in a tax year after deducting allowable losses accruing in the same or earlier tax years.
HMRC guidance / practice
Step 1 – Identify the shares disposed of (Share Identification / Matching Rules)
Shares of the same class in the same company are typically pooled into a Section 104 holding, which is treated as a single asset. Each acquisition adds to the pool's quantity and allowable cost; each disposal reduces it proportionately.
Step 2 – Apportion the pool cost to the shares sold
Where only some shares in the Section 104 holding are disposed of, the allowable cost is apportioned. In practice, this apportionment may be made by reference to the number of shares sold. The formula used is:
Cost attributable = Pool cost × (shares disposed of / total shares in pool)
Step 3 – Compute the gain
The gain is then:
| £ | |
|---|---|
| Disposal proceeds | X |
| Less: Allowable cost (apportioned from pool) | (X) |
| Less: Incidental costs of disposal | (X) |
| Chargeable Gain | X |
A worked example from HMRC guidance illustrates this:
- Disposal of 2,000 shares at £0.875 each = £1,750 proceeds
- Pool cost apportioned: 39.33% × £3,750 = £1,475
- Gain = £275
Priority of Income Tax over CGT
Before computing a capital gain, you must consider whether any part of the proceeds has already been charged to income tax — such amounts must be excluded from the CGT computation under s.37 TCGA 1992. Similarly, costs already deducted for income tax purposes cannot also be deducted as CGT allowable expenditure under s.39.
Special cases
- Companies disposing of shares held in a Section 104 pool may also be entitled to an indexation allowance (frozen at December 2017), which reduces the gain but cannot create a loss.
- Where only some shares qualify for Investors' Relief, only the appropriate fraction of the gain qualifies for the reduced 14% CGT rate, calculated as: Gain × Q/T (where Q = qualifying shares in the holding, T = total shares disposed of).
Citation sources
S37 TCGA 1992 requires that any part of the consideration for the disposal of an asset which has been either: charged to tax as income, or taken into account in computing income or profits or gains or losses of the disposer, should be excluded from a computation of a chargeable gain. Similarly, S39 TCGA 1992 requires the exclusion from allowable capital gains deductions of amounts which are: allowable in computing profits or losses of a trade etc for the purposes of Income Tax, or allowable in c
This is a part-disposal of the section 104 pool, a single asset consisting of 5,000 ‘A’ Ordinary shares with an allowable cost of £3,750 (see above). Section 129 does not apply further, and so the cost attributable to the shares sold is determined by section 42. The proportion of the cost of the pool is given by (consideration for the disposal divided by [consideration for the disposal + market value of property undisposed of]), ie (2,000 x £0.875) / [(2,000 x £0.875) + (3,000 x £0.90)] = 1,750
he case of the acquisition of an asset, with costs of advertising to find a seller, and b in the case of a disposal, with costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation of the gain, including in particular expenses reasonably incurred in ascertaining market value where required by this Act. 3 Except as provided by section 40, no payment of interest shall be allowable under this section. 4 An
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