Last updated: May 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, with worked examples.
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 2025/26, 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.
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 2025/26.
| 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. This was cut from £12,300 in 2022/23. The £3,000 figure also applies to 2024/25.
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 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. FinanceSimply 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.
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 2025/26.
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.