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Tax and ISA Rules
Find out how ISA subscription rules and Capital Gains and dividend taxes affect you and your investments.
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You can find out how ISA subscription rules and the role of Capital Gains and dividend taxes affect you and your investments here.
This information has been prepared for basic information purposes only and is aimed at UK taxpayers. The actual tax you would have to pay will depend on other income and investments and personal circumstances. This is not intended to provide, nor should it be relied on for tax advice. Tax treatment depends on individual circumstances and may be subject to change in the future.
ISA subscriptions
ISA subscriptions allow you to save a set amount of money each tax year that is protected against UK Capital Gains and dividends tax. The amount is £20,000 for the 2025/26 tax year.
You can subscribe to multiple ISAs of the same type (except for Lifetime ISA) within the tax year. All subscriptions must stay within the overall ISA limit of £20,000.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit you make when you sell or dispose of an asset that has increased in value. It’s the gain that’s taxable, not the total amount you receive from the sale.
When you sell shares, the gain is calculated by subtracting the original purchase price (including any related costs) from the selling price.
In the UK, individuals have a yearly CGT allowance of £3,000 for the 2025/26 tax year. Gains above this threshold are taxed at rates depending on your income tax band.
How does the 2024 Autumn budget affect the CGT you pay?
The 2024 Autumn Budget has increased CGT rates from 30 October 2024. For basic-rate taxpayers, the CGT rate has increased from 10% to 18%, while higher-rate taxpayers now face a rate of 24%, up from 20%. More about the increase in CGT rates.
Note that when the gain is added to your income it may move you to a higher rate tax band. These changes apply to the gains you make that are above your yearly CGT allowance from the sale of investments not held in an ISA.
Which investments in my Scottish Widows Share Dealing Account may attract CGT?
- Shares
- Exchange Traded Funds (ETFs)
- Funds
- Investment Trusts
- Bonds
Gilts have a CGT exemption meaning you do not pay Capital Gains Tax when you sell Gilts.
Strategies to mitigate Capital Gains Tax on sales of investments
Capital Gains Tax (CGT) can significantly impact the returns on your investments. However, here are some things you could consider to mitigate your CGT liability when selling investments.
Use tax-efficient accounts
Capital Gains Tax is not applicable to investments sold from within an Individual Savings Account (ISA) or a Self-Invested Personal Pension (SIPP). If your investments are held outside an ISA, you can use a process called Bed and ISA to sell those shares to realise a gain and then immediately buy them back within an ISA. This way further gains on these investments won’t attract CGT.
Use your annual exemption
Each tax year, you have a yearly CGT exemption (£3,000 for the 2025/26 tax year). By spreading the sale of shares across multiple tax years, you can make full use of this exemption.
Transfer assets to a spouse or civil partner
Transfers between spouses or civil partners are exempt from CGT. This allows you to use both individuals’ yearly exemptions, effectively doubling your tax-free allowance.
Offset gains with losses
If you have incurred losses on other investments, you may be able to use these to offset gains, reducing your overall CGT liability.
We’ve discussed some of the things you can consider to help manage your CGT liability, ensuring your investment returns are tax-efficient.
However, it's important to consult with a financial adviser or tax adviser to tailor these strategies to your specific situation and ensure compliance with current tax laws. Information correct at 07 April 2025.
ISAs protect your investments from Capital Gains Tax
Any gains on investments within an ISA are not liable for UK Capital Gains Tax. You can move your existing investments into an ISA by a process referred to as Bed and ISA. Find out more about Capital Gains Tax and how it works on the Government website.
Tax on dividends
Everyone has a dividend allowance, which is £500 for the 2025/26 tax year. This means you can earn up to the allowance in dividends each tax year without owing tax.
Dividends are a portion of a company’s profits that are paid to its investors. The rate of tax you owe on dividends will depend on your income tax band.
There is more information about tax on dividends on the Government website.
Example: how it works in practice
It is set at £500 for the 2025/26 tax year. This means you can earn up to the allowance in dividends each tax year without owing tax.
For example, if you receive £2,900 worth of dividends in the 2025/26 tax year, £500 of those would fall within your dividend allowance and wouldn’t be taxed. It would leave £2,400 that would be liable for tax.
In the 2025/26 tax year a basic rate taxpayer would owe 8.75% (£210), a higher rate taxpayer would owe 33.75% (£810), and an additional rate taxpayer would owe 39.35% (£944.40) on this dividend income.
The Scottish Widows Share Dealing Service is operated by Halifax Share Dealing Limited. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Registered in England and Wales no. 3195646. Halifax Share Dealing Limited is authorised and regulated by the Financial Conduct Authority under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.