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UK capital gains tax on trading

United Kingdom: gains on shares and most assets are taxed as capital gains above an annual exempt amount, using pooled section 104 cost rather than individual lots.

HMRC pools identical shares into a single section 104 holding with an averaged cost, so UK investors cannot choose which lot is sold in the way specific-identification-cost-basis allows in the United States. Matching rules apply same-day acquisitions first, then those in the next 30 days, before the pool.

The annual exempt amount has been cut sharply in recent years and rates depend on your income band and the asset type. Losses must generally be claimed to be usable and can be carried forward once claimed.

Very active traders occasionally fall into trading income treatment instead, taxed as self-employment, but HMRC applies this rarely to people managing their own money. uk-spread-betting-tax treatment is a separate matter entirely.

This is general information about the United Kingdom, not tax advice. Rules change and depend on your circumstances; consult a qualified adviser or HMRC guidance.

Related: hmrc, uk-bed-and-breakfasting-rule, uk-spread-betting-tax, stocks-and-shares-isa, uk-stamp-duty-reserve-tax

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Bid-ask spread in an order bookSell orders stacked above buy orders with a gap between the best of each.SELLERS (asks)50.0690050.051,40050.0460050.011,10050.002,30049.99800spread = 0.03BUYERS (bids)
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.

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