Last updated: July 2026 · Sourced from official UK government publications
Plain-English explainer. All rates and rules drawn from HMRC and gov.uk. Not financial advice. See disclaimer below.
No. Gains on shares held inside a Stocks & Shares ISA are exempt from Capital Gains Tax (CGT) under HMRC rules, no matter how big the gain. The same applies to dividends and interest received inside the wrapper. Below is how that works in practice for the 2026/27 tax year, with worked examples.
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 for it and there is no CGT to pay, nothing to report to HMRC, and nothing to put on a Self Assessment return.
That exemption covers the other taxes investments normally attract too. Here is the whole picture for 2026/27:
| What happens | In a General Investment Account | In a stocks & shares ISA |
|---|---|---|
| You sell shares at a profit | CGT at 18% or 24% on gains above the £3,000 annual exempt amount | No CGT, no upper limit |
| A company pays you a dividend | Dividend tax above the dividend allowance | No dividend tax |
| A bond or cash holding pays interest | Income tax may apply | No income tax |
| Tax year end paperwork | Gains may need reporting to HMRC | Nothing to report |
Crucially, the exemption is uncapped. The £20,000 annual ISA allowance limits how much new money you can pay in during 2026/27, not how much that money is allowed to grow. A pot built up over ten years can be worth six figures and still be entirely outside the CGT net.
Yes. Buying and selling inside the wrapper is not a taxable event. Switching from one fund to another, rebalancing, taking profits, cutting a loser, none of it creates a CGT liability, because HMRC treats the whole account as outside the CGT regime rather than tracking each disposal.
Outside an ISA, the same activity means keeping records of every purchase price, applying the share matching rules, and working out whether your gains for the year cross the annual exempt amount. Inside an ISA, none of that admin exists. 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 keeps working for as long as the money stays inside it. Take cash out and the money that leaves loses its shelter, though 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 is a UK tax on the profit you make when you sell an asset that has gone up in value. It is charged on the gain, not the full sale price. In 2026/27, the rates for most assets including shares are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, after an annual exempt amount of £3,000.
Which of those two rates applies depends on how much of your basic-rate band is left once your income is counted, so it is worth understanding how the income tax bands stack up before working out a gain. For the full mechanics, including how the rate is determined and how to report, see our Capital Gains Tax guide.
The Individual Savings Account (ISA) is a statutory tax wrapper introduced by HMRC in 1999. Investments held inside an ISA, including shares, ETFs, investment funds, and bonds inside a Stocks & Shares ISA, are exempt from three taxes:
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 statutory basis is published at gov.uk/individual-savings-accounts.
The CGT difference between an ISA and a General Investment Account (GIA) becomes obvious in a simple side-by-side example. Imagine you bought £15,000 of shares and sold them for £25,000 (a £10,000 gain) as a basic-rate taxpayer in 2026/27.
| Account type | Gain | Allowance | Taxable | CGT due |
|---|---|---|---|---|
| Stocks & Shares ISA | £10,000 | n/a (exempt) | £0 | £0 |
| General Investment Account | £10,000 | £3,000 | £7,000 | £1,260 |
For a higher-rate taxpayer, the same gain in a GIA would attract £1,680 of CGT, while the ISA still pays nothing. Over a 20- or 30-year investing horizon, the ISA wrapper can save tens of thousands of pounds.
Outside an ISA, every taxpayer has a £3,000 annual exempt amount that shelters the first £3,000 of gains in a tax year. It was cut from £12,300 in 2022/23 and the £3,000 figure still applies in 2026/27.
Inside an ISA the £3,000 allowance is not relevant, because gains are exempt without limit. As a result, ISA usage among UK retail investors has been rising, particularly since the annual exempt amount started shrinking.
The CGT exemption is absolute, but the wrapper is not a blanket shield against every cost. Four things still apply inside a stocks and shares ISA.
There is also a change already legislated for the future. From 6 April 2027, HMRC will apply a flat-rate 22% charge to interest paid on cash held inside a stocks and shares ISA or an Innovative Finance ISA, and portfolios made up wholly of cash-like holdings will stop being eligible. The same reform cuts the cash ISA limit to £12,000 for under-65s from that date, with £20,000 kept for savers aged 65 and over. None of it touches the CGT exemption on investments, and none of it applies in 2026/27.
The Stocks & Shares ISA is not the only CGT-free way to invest. Two other UK wrappers also exempt gains from CGT:
Each wrapper has different access rules, eligibility criteria, and tax treatment. Which combination is appropriate depends on your circumstances. Our guides on each (linked above) explain the rules. Personalised guidance should come from a regulated adviser.
Because every reinvested dividend or rebalancing trade inside an ISA also escapes tax, the savings compound. As an illustration: a £20,000 contribution growing at 7% per year over 30 years would be around £152,000 inside an ISA. The same growth pattern in a GIA, after CGT and dividend tax on rebalancing, typically ends up closer to £125,000. That is a difference of nearly £27,000 driven only by which wrapper held the money. Actual returns will vary, and 7% is illustrative, not a forecast.
The ‘Bed and ISA’ technique describes selling in a GIA and rebuying inside an ISA, which then shelters future gains. The initial sale itself can still trigger CGT in the year it happens.
ISA allowances, CGT rates, and dividend allowances change at every Budget. Kvanta covers every announcement in plain English.
Subscribe free →No. Gains on shares, funds, and bonds held inside a Stocks & Shares ISA are exempt from CGT, regardless of size, and they never appear on a tax return.
Yes. The exemption has no ceiling. The only cap is on new money going in, £20,000 across all your ISAs in 2026/27. Growth on money already inside stays exempt however large it gets.
Inside an ISA, gains are tax-free without limit. Outside, gains above the £3,000 annual exempt amount are taxed at 18% (basic rate) or 24% (higher/additional rate) in 2026/27.
No. Buying, selling, or switching between investments inside an ISA does not affect tax status. The wrapper stays tax-free.
Withdrawals are tax-free. There is no CGT, no income tax on dividends or interest, and no need to report the withdrawal to HMRC.
Yes. Dividends paid inside an ISA are exempt from dividend tax, in addition to the CGT exemption.