Various taxes need to be paid in respect of company shares. Shareholders should be aware of the tax liabilities that may arise when they buy, sell, or make any money from their shareholdings. We consider the specific forms of tax on shares below.
Stamp Duty is most commonly associated with the large sum of tax you need to pay when you buy a house. However, Stamp Duty is also payable on the purchase of shares . The standard rate of Stamp Duty tax on shares is 0.5% of the transaction, which takes effect if:
Stamp duty is calculated based on the price paid for shares, irrespective of their actual market value. Transactions where SDRT or Stamp Duty must be paid in respect of shares include the following purchases:
Tax does not need to be paid in respect of shares if:
* If shares are inherited, these will be liable to Inheritance Tax – similarly, if they are gifted within 7 years of the death of the gifter of the shares.
A higher level of SDRT or Stamp Duty at 1.5% must be paid if shares are transferred into some ‘depositary receipt schemes’ or ‘clearance services’ (where the transfer is not an integral part of an issue of share capital).
This can occur when the shares are transferred to a service operated by a third party, such as a bank, where they can then be traded free of Stamp Duty or SDRT.
It is advisable to speak to your accountant if you are in any doubt because this is a very complex area.
Capital Gains Tax (CGT) must be paid on any gains (profit) made in respect of shares that are subsequently sold or disposed of (e.g. given away).
To work out the relevant gain for the purposes of CGT, you need to calculate the difference between the price paid for the shares and the price at which they were sold. The price difference comprises the gain, which is the sum that is taxed.
In some cases, you will need to use the market value to work out the gain. For example, if the shares:
If shares were gifted or sold to you by someone who claimed Gift Hold-Over Relief (see below), use the amount that they originally paid for the shares to calculate your gain.
If you bought shares for less than they were worth, use the amount that you paid for them to work out your gain.
Certain costs associated with buying or selling shares can be deducted from your gain, including:
The following forms of tax relief are available:
Once the level of gain has been ascertained, you need to work out the extent of liability for Capital Gains Tax. There is an Annual Exempt Amount (tax-free allowance) of £3,000. This is the total gains you can make without being subject to any tax.
Any gains that exceed the annual tax-free allowance will be subject to the relevant level of taxation. For the 2026/27 tax year, these are:
You can use this HMRC calculator to work out the extent of CGT liabilities if the shares sold were (i) the same type, acquired in the same company on the same date, and (ii) sold at the same time. The calculator cannot be used if other shares (or chargeable assets) were sold in the tax year.
Capital Gains Tax is generally not payable in respect of shares that a shareholder gifts to their husband, wife, civil partner, or a charity.
Additionally, you do not pay CGT when you dispose of:
Shareholders often receive dividend payments. As long as the amounts fall within their Personal Allowance (the amount of income an individual can earn tax-free in a year), there will be no tax to pay. The standard Personal Allowance is currently £12,570.
There is also an annual dividend allowance of £500, which means that no tax is payable on the first £500 of dividend income.
Shareholders are liable to pay dividend tax on any dividend income above £500 that exceeds their Personal Allowance. The rate of taxation depends on the individual’s Income Tax band.
The current rates of dividend tax and tax bands are as follows:
It is worth noting that these rates of dividend tax are lower than the equivalent levels of Income Tax.
Any dividend payments under the £500 threshold do not have to be declared to HMRC. Furthermore, no tax is payable in respect of shares held in an ISA.
A shareholder receives £5,000 in dividends and earns £20,000 in income from their job during the 2026/27 tax year. This equates to total annual earnings of £25,000.
The shareholder’s total tax bill for the year is £2,564, which leaves take-home earnings of £22,436
The way in which dividend tax is paid depends on whether the total dividend payments exceed £10,000 for the tax year.
£10,000 or less to pay
HMRC should be informed by contacting the Income Tax helpline and/or asking them to change the tax code for the shareholder. In this case, it may be possible for tax to be drawn from any wages or pension. Alternatively, it can be reported in a Self Assessment tax return.
In this case, a Self Assessment tax return must be completed. If the shareholder is not already registered for Self Assessment, they must register by 5th October after the end of the tax year in which the dividend payments were received.