When a company is bought out, many employees receive a payout for their company shares or share options - often without any control over when those shares are sold. In cases where shares were awarded as part of an employee reward or incentive scheme, the acquisition cost is typically negligible, meaning that almost the entire sale proceeds will usually be treated as a capital gain.
If this applies to you, here are the key Capital Gains Tax (CGT) rules you need to be aware of.
When CGT applies to company shares
You may be liable for CGT when you dispose of shares that have increased in value, unless they were held in an ISA or qualifying pension.
Because employee reward shares are often granted at little or no cost, your purchase cost (or “base cost”) is very small, so the taxable gain will typically be close to the full amount you receive when the acquiring company sells the shares on your behalf.
This applies whether the shares came from:
- Share option exercises
- Longterm incentive plans (LTIPs)
- Employee share schemes
- Free or gifted share awards
Your tax-free allowance (annual exempt amount)
For the 2025/26 tax year, the CGT Annual Exempt Amount is:
- £3,000 for individuals [gov.uk]
This allowance cannot be carried forward - it is strictly “use it or lose it.”
With the allowance now so low, even modest share awards can create a CGT liability.
Current CGT rates for shares
From 30 October 2024, CGT on share disposals is charged at:
- 18% for basicrate taxpayers
- 24% for higherrate taxpayers
Your rate is determined by your total taxable income plus gains.
Allowable costs - and why you might not have full information
When calculating a capital gain, you can deduct:
- The purchase cost (often £0 or negligible for reward shares)
- Stockbroker or dealing fees
- Stamp Duty Reserve Tax (SDRT) paid when acquiring shares
However, in a corporate buyout:
- Shares are usually sold automatically
- You may only be provided with a net sale figure
- Transaction costs may be bundled or unclear
If you do not receive a breakdown of sale proceeds and costs, you may need to request it from HR, the corporate finance team, or the plan administrator to ensure accurate CGT reporting.
Using capital losses to reduce your gain
If you have realised other capital losses in the same tax year, you can use them to reduce the gain on your company shares - which may significantly cut the CGT payable.
You can also use carried forward losses from previous tax years, provided they were reported to HMRC at the time.
This is one of the factors that may affect your final CGT position.
When CGT must be reported
For share disposals, CGT is generally reported and paid through Self Assessment, due by:
31 January following the end of the tax year in which the disposal occurred.
Example: Sale in the 2025/26 tax year → CGT due by 31 January 2027.
How to calculate your Capital Gains Tax
As tax can be complex and personal circumstances vary, many people choose to consult an accountant or tax professional.
You can also use the HMRC calculator available on the government website
Tax when you sell shares: Work out your gain - GOV.UK
FCA Compliant Note
This article provides general information only and does not constitute tax or investment advice. Tax rules depend on your personal circumstances and may change. For personalised guidance, please seek advice from a regulated professional.