How does the share identification rules work for capital gains?
Answered 11 March 2026
Here is a comprehensive explanation of how the share identification rules work for Capital Gains Tax (CGT):
Share Identification Rules for Capital Gains Tax
Why the Rules Are Needed
Shares of the same class in the same company are, unless numbered, identical and indistinguishable from one another. This creates a problem when only some shares from a larger holding are sold — you need to know which shares were sold and what they cost in order to compute the gain or loss.
The rules also apply beyond shares to any other assets "of a nature to be dealt in without identifying the particular assets disposed of or acquired" (e.g. bullion).
What the Law Says
TCGA 1992, s.104 provides the foundational pooling rule: any number of securities of the same class acquired by the same person in the same capacity are to be regarded as indistinguishable parts of a single asset — the Section 104 holding — which grows or diminishes as further shares are acquired or disposed of.
A disposal of part of a Section 104 holding is treated as a part disposal of a single asset, and the allowable costs are averaged across the pool.
TCGA 1992, s.106A sets out the order of identification for CGT disposals (on or after 6 April 2008). Disposals must be matched in the following strict priority order:
- Same-day rule (TCGA92/s.105(1)(b)): Disposals are first matched against acquisitions of shares of the same class made on the same day.
- "Bed and breakfast" rule (TCGA92/s.106A(5) and (5A)): Disposals are then matched against acquisitions made within the 30 days following the disposal (provided the person was UK resident at the time of the acquisition).
- Section 104 holding (TCGA92/s.104): Disposals are matched against shares in the pool, without identifying any particular shares within it.
- Later acquisitions (TCGA92/s.105(2)): Finally, against any remaining acquisitions after the disposal date, taking the earliest first.
Shares identified under rules 1 or 2 above do not enter the Section 104 holding (TCGA92/s.105(3) and s.106A(5ZA)).
HMRC Guidance / Practice
The Section 104 Holding (the "pool")
Share pooling was reintroduced for CGT purposes for disposals on or after 6 April 2008. Shares of the same class in the same company acquired at any time by a person in the same capacity will normally enter the Section 104 holding. The pool grows with each new acquisition and reduces with each disposal. No indexation allowance is available for CGT purposes. Any shares held on 6 April 1982 are included at their 31 March 1982 value (the "kink test" no longer applies).
The Same-Day Rule
All shares of the same class acquired or disposed of by the same person on the same day and in the same capacity are treated as a single transaction. If the number of shares acquired on the same day exceeds those sold, the surplus enters the Section 104 holding (unless matched under the bed and breakfast rule).
The "Bed and Breakfast" Rule
This rule was introduced in 1998 to counter the tax-avoidance practice of selling shares and buying them back the next day to crystallise a gain or loss. For the rule to apply, the acquisition must be: (i) of the same class of shares, (ii) by the same person in the same capacity, and (iii) within 30 days after the disposal. The rule does not apply if the person was non-UK resident at the time of the acquisition (for acquisitions on or after 22 March 2006).
Relevant Securities
"Relevant securities" (broadly, most debt-like securities) are excluded from the s.104 pooling rules and have their own separate identification rules under TCGA92/s.108. For CGT purposes (individuals etc.), the normal share identification rules apply to relevant securities for disposals on or after 6 April 1998.
Options
Options of the same series (same type, expiry date, and exercise price) are also pooled in a Section 104 holding, so the same share identification rules apply to their disposal.
Summary Table
| Priority | Rule | Statutory Basis |
|---|---|---|
| 1st | Same-day acquisitions | TCGA92/s.105(1)(b) |
| 2nd | Acquisitions within 30 days after disposal ("bed & breakfast") | TCGA92/s.106A(5) |
| 3rd | Section 104 holding (the pool) | TCGA92/s.104 |
| 4th | Later acquisitions (earliest first) | TCGA92/s.105(2) |
Citation sources
One feature of shares is that unless they are numbered, and most shares are not, all shares of the same class in the same company are identical. The problem this causes can be illustrated quite easily. In 2010 Mr A bought 1,000 shares in B PLC at a price of £2.50 per share. He bought a further 500 shares in 2005 at £3 per share. He has now spent £4,000 on 1,500 shares. In 2010 he sold 250 shares for £4 each. To work out the capital gain you need to know which shares the taxpayer sold and how muc
For individuals and others within the charge to Capital Gains Tax on disposals of shares on or after 6 April 2008 the previous identification rules were simplified with the reintroduction of the Section 104 holding for new acquisitions and its widening to include all shares acquired before 31 March 1982 and after 5 April 1998. Section 106A provides that, for matching acquisitions and disposals of shares of the same class in the same company held in the same capacity the identification rules set
Share pooling was reintroduced for disposals on or after 6 April 2008 for those within the charge to Capital Gains Tax. Shares of the same class in the same company acquired at any time by a person in the same capacity will normally become part of the Section 104 holding. The Section 104 holding is simply the share pool. However, shares that are identified with acquisitions under the ‘same day’ or `bed and breakfasting’ identification rules do not become part of the pool. The Section 104 holding
urities constituting or forming part of the section 104 holding which were held by the person making the disposal on 31 March 1982. 4 For the purposes of this Chapter securities of a company which are held— a by a person who acquired them as an employee of the company or of any other person, and b on terms which for the time being restrict his right to dispose of them, shall (notwithstanding that they would otherwise fall to be treated as of the same class) be treated as of a different class fro
All options of the same type, that is put or call, relating to the same share are called a class. All options of the same class with the same expiry date and exercise price form a series. For Capital Gains Tax purposes options of the same series are pooled in a Section 104 holding. Therefore, the share identification rules described in CG51550+ will apply to a disposal of options of the same series.
The rule was introduced in 1998 to counter what is known as 'bed and breakfasting' of shares. For a general discussion on `bed and breakfasting' see CG13350. Disposals must be identified with acquisitions of shares of the same class, see CG50203 acquired by the same person in the same capacity, and acquired within the 30 days after the disposal. This rule has priority over all other identification rules except the `same day' rule in TCGA92/S105(1), see above. This ‘bed and breakfasting’ rule doe
All shares of the same class in the same company acquired by the same person on the same day and in the same capacity are treated as though they were acquired by a single transaction, TCGA92/S105 (1)(a). All shares of the same class in the same company disposed of by the same person on the same day and in the same capacity are also treated as though they were disposed of by a single transaction, TCGA92/S105 (1)(a). If there is an acquisition and a disposal on the same day the disposal is identif
Part IV Shares, securities, options etc. Chapter I General Share pooling, identification of securities, and indexation Share pooling: general interpretative provisions. 104 1 Any number of securities of the same class acquired by the same person in the same capacity shall for the purposes of this Act (subject to express provision to the contrary) be regarded as indistinguishable parts of a single asset growing or diminishing on the occasions on which additional securities of the same class are a
The definition of relevant security is in TCGA92/S108. Full details are in CG51650-51651. Relevant securities have their own identification rules, see CG51653+. These rules apply for all persons up to 5 April 1998. For disposals on or after 6 April 1998 the rules apply only for companies and other concerns within the charge to Corporation Tax; for disposals by others, eg individuals within the charge to Capital Gains Tax, the normal share identification rules apply, see CG51640.