I have been reading this forum for a while and finally decided to post. I am recently retired and have a portfolio of shares that I built up over about 25 years, currently worth roughly £180,000. The original cost was around £60,000 so there is a substantial gain sitting in there. My plan is to sell them gradually over several tax years to make use of the annual CGT exemption each year, which I understand is £3,000 for 2025/26.
What I am not sure about is how HMRC treats the order of disposal when you hold shares in the same company bought at different times. I bought Lloyds shares in three tranches, 2004, 2011, and 2018, all at different prices. Do I get to choose which tranche I am selling, or does it work on a pooled average basis? I have a feeling it is the latter but I want to be sure before I start disposing.
The reason this matters beyond the shares is that my wife and I also own a buy to let property jointly which we will probably sell in the next couple of years. I want to understand whether the same annual exemption logic applies there, i.e. could we time the sale to fall in a tax year where we have not already used up the £3,000 each on share sales. My rough calculation is that if we have both used our exemptions on shares, we would be paying CGT on the full gain from the property, which at current rates could be significant.
I realise I could just ask an accountant but I would like to understand the mechanics myself first so I can have an intelligent conversation with one. Has anyone else been doing something similar?
It is pooled. Listed shares of the same class in the same company are subject to the section 104 pooling rules, which means your three tranches of Lloyds are treated as a single holding with a blended average base cost. You do not get to pick which tranche you are disposing of.
On the annual exempt amount, yes, it is £3,000 per person for 2025/26 and applies to net chargeable gains across all asset classes in the same tax year. So if you and your wife each crystallise £3,000 of gains from share sales in a given year, neither of you has any exemption left to set against the property gain if it completes in the same year. Worth planning the timing of both disposals together.
I went through a similar thought process last year after selling my BTL flat and I will be honest, once I sat down and did the maths on the £3,000 exemption the whole gradual disposal strategy started to feel a bit like rearranging deck chairs. If you are sitting on £120,000 of gains across shares and a property, saving £3,000 a year off your taxable gains is going to take you decades to work through, and that is assuming the exemption does not get cut again, which given the direction of travel since 2023 I would not bet against. The real question is whether the hassle of drip feeding sales over ten years and tracking your section 104 pool each time is worth the saving compared to just selling, paying the tax, and getting on with your life. I ended up parking the BTL proceeds in a mix of savings accounts and premium bonds and I still have not decided what to do with it, so I am hardly a poster child for decisive action, but at least I am not spending my weekends with a spreadsheet trying to optimise a £600 tax saving.
Hi Guys, thanks to both of you for the replies, really helpful.
@Frankie91 that is exactly the kind of reality check I needed. I had been sitting here with a spreadsheet thinking I could drip feed sales over six or seven years and somehow come out ahead, but you are right that the annual exemption is so small now that it barely makes a dent on a portfolio of this size. I think I had been over-estimating how much I could shelter each year.
@CGT_Watcher, the pooling point is clear now, thank you. One thing I have been reading about is whether I could sell a tranche and then immediately repurchase inside an ISA, so the gain is crystallised but the shares continue to grow tax free going forward. I believe the old bed-and-breakfast rules only apply if you repurchase the same shares within 30 days in the same wrapper, i.e. outside an ISA. So buying back inside an ISA the next day should be fine? Or am I misunderstanding something here.
The strategy is sometimes called bed and ISA and yes, it works as you describe. You sell in your general account, crystallising the gain, and repurchase the same shares inside an ISA wrapper. The 30 day matching rule under TCGA 1992 s106A only applies to reacquisitions in the same capacity, so an ISA purchase is not matched back. The practical constraint is the annual ISA subscription limit, which is £20,000. If the shares you want to shelter cost more than that, you can only move £20,000 worth per tax year. Professional advice is worth taking if the numbers are significant.