I have £20,000 in shares from an old employer, can I cut my capital gains tax bill?

Daily Mail​

30-05-2025

I have £20,000 worth of shares held outside of an Isa from an old employer's share save and employee share schemes dating back to when I worked there between 2008 and 2014.
I would like to sell the shares and reinvest the money into more diversified investments but think I will end up with a big tax bill, even though I am a basic rate taxpayer.
I have been reinvesting dividends and buying more shares regularly throughout the ownership. What do I use as the purchase price for capital gains tax – each individual share price or an average? And is there any way that I can cut my tax bill if I sell?
The shares are held as certificates, if I keep hold of them, can I move them into an investment account?
Rob Morgan, chief analyst at Charles Stanley Direct, replies: Gains on shares purchased at various points through additions such as reinvesting dividends can appear be something of a tax headache.
However, if you have kept good records the calculations in most circumstances aren't too bad.
Capital gains tax rules
First the basics. Capital gains tax (CGT) is a tax on any profits made on investments, and as you are aware you will be potentially liable on the sale of shares held outside a tax-efficient account such as an Isa.
The amount of tax you're charged depends on which income tax band you fall into. For the 2025/26 tax year, rates of CGT are 18 per cent and 24 per cent for basic and higher rate taxpayers respectively.
This rate applies to the profit made – so sale proceeds minus the cost of purchase.
> What is capital gains tax? Read Charles Stanley Direct's guide
Not widely understood is the interaction of CGT with income tax bands. If you're a basic rate taxpayer, any gain taken when added to your income could push you into the higher-rate bracket.
If so, you'd pay 24 per cent on however much of the gain falls into the higher income tax band when added to your income, and 18 per cent on the portion below it.
If you are a Scottish taxpayer your CGT rate depends on the rest of UK income tax bands and not the Scottish tax bands.
You'll only need to pay tax if your realised profits in a tax year exceed the annual capital gains tax allowance. In the 2025/26 tax year, this is £3,000. For example:
If you bought shares for £10,000 and sell them this tax year for £30,000, then you've made a capital gain of £20,000.
If you have no other gains, this is reduced to £17,000 as the first £3,000 falls into the CGT annual exemption.
For a basic rate taxpayer (with income and gains falling below the higher rate tax band) the tax liability is £17,000 x 0.18 = £3,060
However, if the gain tips you into the income tax higher rate band then you pay the higher rate of CGT on the portion over the threshold of £50,270. For this reason, many basic rate taxpayers can end up paying mostly higher rate CGT on large gains.
Calculating CGT from multiple purchases
Calculating the gain on shares and the tax to pay is reasonably straightforward if you have the figures to hand.
In most circumstances you just need to know the number of shares and the total amount paid for them by adding up all the purchase transactions.
You then net the total cost of the sale proceeds (after any fees such as stockbroking commission) to calculate the gain.
When making multiple sales the purchase cost simply applies on a 'pro rata' basis to each sale.
The main exception to this 'pooling' rule is the 'same day' rule whereby shares acquired on the same day as the disposal are taken account of ahead of any others.
There is also the 'bed and breakfasting' or '30 day' rule whereby any shares repurchased within 30 days cancel out the gain or loss generated by the prior sale – but not if repurchased in an Isa. However, it appears neither of these apply in your circumstances.
As with many tax matters, there are examples and help sheets on the HMRC website that can help, but as with any tax issue if you are in any doubt you should consult a qualified tax specialist.
Ways to minimise CGT
To mitigate CGT there are some strategies you can adopt.
If the capital gain, and therefore the potential tax liability, is significant you can consider taking advantage of the CGT allowance over multiple tax years.
The allowance has been much diminished and now stands at just £3,000, but selling an asset in bits over time can help minimise CGT.
You can't do that with a second property or an antique of course, but you can with shares and funds.
If you are planning to keep some or all your holding you can consider using the £20,000 Isa allowance to at least protect it from tax going forward – both in terms of income tax on dividends and any future gains. The process here is known as a 'Bed & Isa' which can help use your CGT and Isa allowances simultaneously.
A Bed & Isa involves selling holdings and then buying them back in an Isa account. The sale part generates a capital gain, so selling or partially selling an existing investment could help with tax planning by using some of your capital gains allowance while keeping your holding.
> Bed & Isa and other Isa rules to make your life easier: Charles Stanley's guide
Outside of an Isa or pension you are prevented from generating gains in this way owing to the 'bed and breakfasting' rule mentioned above.
This highlights that prevention is often easier than cure when it comes to CGT. Buying shares in an Isa, or transferring them in at the earliest opportunity, is often the best way to avoid storing up problems further down the line.
One valuable tactic that many people miss is the special rules around transferring eligible shares from a save as you earn (SAYE) or share incentive plan (SIP) scheme tax free into an Isa within 90 days of acquisition. Potentially, it's a great way to use your Isa allowance and shelter up to £20,000 of a holding from tax.
Another strategy to reduce CGT involves transferring some of the asset to a partner if you are married or in a civil partnership. You usually don't pay capital gains tax on an asset you give or sell to your husband, wife or civil partner, and this could give you the option of using two CGT allowances each tax year. A couple, for instance, could realise gains of up to £6,000 this tax year without paying tax.
You could also consider dividing the shareholding in such a way to take advantage of lower tax bands where one partner's income is lower. This way there may be less tax to pay on the gain as more of it falls into the basic rate band than the higher rate band for one of the pair.
Finally, if you have any losses on investments elsewhere you may have opportunity to set these off against gains. If you sell an asset for less than you paid for, you can report that loss to HMRC to offset against any gains you've made in the same tax year.
You have up to four years from the end of the tax year in which the loss occurred to make a claim. This can reduce your overall taxable gain and in some circumstances bring it below the annual CGT allowance.
Keeping the shares
It can be difficult to know whether to sell a shareholding with a tax liability attached to it. Much depends on the outlook and reliability of the company in question and the level of risk the holder is happy with.
The rule of thumb is that the tax tail shouldn't wag the investment dog, and in the case of a large single stock position it can be wise to diversify to limit the impact if it falls in value. That's especially the case if a drop could have a big impact on your financial resilience.
Having your financial future heavily influenced by one business is a risk most people wouldn't be willing to take – unless they are inexorably attached to it through ownership or otherwise have significant confidence in the prospects.
A diversified approach won't guarantee a better result, but it's far less risky.
Ideally, a careful strategy around sales can help minimise the tax burden and smooth the path towards that. We have only seen the tax burden ratchet over time, and it seems a forlorn hope that it might reverse direction, at least in the near term, so from that perspective there may be nothing to be gained by putting off the issue.
However, if you decide to keep your shares, contact your stockbroker or investment platform to see if they can help with 'dematerialising' them. In other words, converting them from a physical certificate into electronic form.
This will make things easier to manage going forward if you want to keep them. It will also mean future sales are easier to execute and will cost less as brokers generally charge a lot more for a certificated sale.
You'll have to fill in some paperwork to do this and wait a short period for the process to complete. For instance, at Charles Stanley once the original share certificates and signed transfer forms are received we would expect the holdings to be deposited in an online account within 5 to 10 business days under normal circumstances.