Do You Pay Capital Gains Tax on Shares in an ISA?

Is a stocks and shares ISA subject to Capital Gains Tax?

No. A stocks and shares ISA is not subject to Capital Gains Tax. You can sell a holding inside the ISA for ten times what you paid. There is no CGT to pay. Nothing needs reporting to HMRC, and nothing goes on a Self Assessment return.

The exemption also covers other taxes that investments usually attract. Here is the full picture for 2026/27:

The exemption has no cap. The £20,000 annual ISA allowance limits how much new money you can pay in during 2026/27. It does not limit how much that money can grow. A pot built up over ten years can be worth six figures and still sit entirely outside the CGT net.

Are stocks and shares ISAs free of Capital Gains Tax while you trade inside them?

Yes. Buying and selling inside the wrapper is not a taxable event. Switching funds, rebalancing, taking profits, or cutting a loss does not create a CGT liability. HMRC treats the whole account as outside the CGT regime, rather than tracking each sale.

Outside an ISA, the same activity means keeping a record of every purchase price. It also means applying the share matching rules and checking whether your gains for the year go above the annual exempt amount. Inside an ISA, none of that admin applies. The flip side is that losses inside an ISA also sit outside the system. You cannot use a loss made inside the ISA to reduce a taxable gain made elsewhere.

The wrapper protects the money only while it stays inside. Money that is withdrawn loses that shelter. The withdrawal itself is never taxed. How a stocks and shares ISA works day to day, including transfers and what you are allowed to hold, is covered in more detail in that guide.

Capital Gains Tax explained simply

Capital Gains Tax is a UK tax on the profit you make when you sell an asset that has gone up in value. It applies to the gain, not the full sale price. In 2026/27, the rate for most assets, including shares, is 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. These rates apply after an annual exempt amount of £3,000.

Which rate applies depends on how much of your basic-rate band is left once your income is counted. Read how the income tax bands stack up before you work out a gain. For the full mechanics, including how the rate is set and how to report, see our Capital Gains Tax guide.

Why ISA investments are tax-free

The Individual Savings Account (ISA) is a statutory tax wrapper introduced by HMRC in 1999. Investments held inside an ISA are exempt from three taxes. These include shares, ETFs, investment funds, and bonds held in a Stocks & Shares ISA:

• Capital Gains Tax on the profit when you sell
• Dividend tax on income paid by shares
• Income Tax on interest paid by bonds or cash

The exemption has no upper limit. Shares that grow from £20,000 to £200,000 inside an ISA pay no CGT on the £180,000 gain. The same gain in a non-ISA account would trigger a CGT bill of around £42,480 for a higher-rate taxpayer, after the £3,000 allowance. The full rules are published at gov.uk/individual-savings-accounts.

Stocks & Shares ISA vs General Investment Account

The CGT difference between an ISA and a General Investment Account (GIA) is clear in a simple example. Say you bought £15,000 of shares and sold them for £25,000, a £10,000 gain. You are a basic-rate taxpayer in 2026/27.

For a higher-rate taxpayer, the same gain in a GIA would attract £1,680 of CGT. The ISA still pays nothing. Over a 20 or 30 year period, the ISA can save tens of thousands of pounds.

The 2026/27 CGT annual exempt amount (£3,000)

Outside an ISA, every taxpayer has a £3,000 annual exempt amount. It shelters the first £3,000 of gains in a tax year. It was cut from £12,300 in 2022/23. The £3,000 figure still applies in 2026/27.

• 2022/23: £12,300
• 2023/24: £6,000
• 2024/25 onwards, including 2026/27: £3,000

The £3,000 allowance does not matter inside an ISA, because gains are exempt without limit. As a result, ISA use among UK retail investors has risen, particularly since the annual exempt amount started to shrink.

What the ISA wrapper does not cover

The CGT exemption is absolute. But the wrapper does not shield you from every cost. Four things still apply inside a stocks and shares ISA.

• Stamp duty reserve tax on UK share purchases. This is charged when you buy. Holding the shares in an ISA does not exempt the purchase from it. It is separate from the stamp duty you pay on property, which uses completely different thresholds.
• Withholding tax on overseas dividends. Some foreign companies deduct tax at source before the dividend reaches you. This is a foreign tax, so a UK ISA cannot switch it off.
• Losses. A loss made inside an ISA cannot be set against a taxable gain made outside it. The exemption runs both ways.
• Investment risk. The wrapper protects the tax treatment, not the value. Shares inside an ISA can fall just as far as shares outside one.

A change is already confirmed for the future. From 6 April 2027, HMRC will apply a flat-rate 22% charge to interest paid on cash held inside a non-cash ISA, such as a stocks and shares ISA or an Innovative Finance ISA. Portfolios made up wholly of cash-like holdings will also stop being eligible. The same reform cuts the cash ISA limit to £12,000 for under-65s from that date. Savers aged 65 and over keep the £20,000 limit. None of this touches the CGT exemption on investments. None of it applies in 2026/27.

Other tax-free wrappers: pensions and Lifetime ISAs

The Stocks & Shares ISA is not the only CGT-free way to invest. Two other UK wrappers also exempt gains from CGT:

• Pensions (SIPP, workplace): growth inside a pension is exempt from CGT and income tax. Contributions also get tax relief at your marginal rate. Some restrictions apply. You cannot normally access the money until age 55, rising to 57 on 6 April 2028. Withdrawals above the 25% tax-free lump sum are taxed as income.
• Lifetime ISA (LISA): a type of ISA for first-time buyers and retirement saving. It has the same CGT exemption as a regular ISA. It also adds a 25% government bonus on contributions up to £4,000 per year. That £4,000 sits inside the same £20,000 ISA allowance. Taking money out for anything other than a first home, age 60, or terminal illness triggers a 25% withdrawal charge.

Each wrapper has its own access rules, eligibility criteria, and tax treatment. Which combination fits you depends on your circumstances. Our guides on each (linked above) explain the rules. Personalised guidance should come from a regulated adviser.

How much CGT does the ISA wrapper save in practice?

Every reinvested dividend and rebalancing trade inside an ISA also escapes tax. So the savings compound. As an illustration, a £20,000 contribution growing at 7% a year for 30 years would be around £152,000 inside an ISA. The same growth in a GIA, after CGT and dividend tax on rebalancing, typically ends up closer to £125,000. That is a gap of nearly £27,000, caused only by the wrapper that held the money. Actual returns will vary. The 7% rate is illustrative, not a forecast.

The ‘Bed and ISA’ technique means selling in a GIA and buying back inside an ISA. The ISA then shelters future gains. The sale itself can still trigger CGT in the year it happens.