Advanced Taxation (UK) · Capital gains tax and trusts

Share Matching Rules and Section 104 Pool in CGT

Updated 11 October 2026 · Fact-checked

For an individual, shares sold are matched with purchases in a fixed order: same day, then the next 30 days, then the section 104 pool. The pool holds all other shares at pooled cost. Bonus issues, rights issues and share-for-share exchanges change the pool or the cost base without creating a disposal of the old shares.

Understand Share Disposals, Reorganisations and Share Matching

Shares of the same class in the same company are identical, so you cannot say which shares an investor sold. The CGT rules solve this by matching each disposal with acquisitions in a fixed order. The order stops people creating losses by selling and quickly rebuying the same shares.

For an individual, match a disposal in this order:

Acquisitions on the same day as the disposal.
Acquisitions in the 30 days after the disposal (the bed and breakfasting rule).
The section 104 pool, which holds all earlier acquisitions of the same class.

The pool is one running total of the number of shares and their total cost. When you sell from the pool, the cost allowed is the fraction of pool cost equal to shares sold ÷ shares in the pool. Shares bought after a disposal date within the 30-day window are matched to that disposal, not added to the pool.

A bonus issue gives free shares. It adds shares to the pool but no cost. A rights issue is an offer to existing holders to buy more shares at a set price. The shares are treated as part of the original holding. You add the number of new shares and the cash paid to the pool. They are not matched under the same day or 30 day rules.

In a share-for-share exchange on a takeover, a shareholder swaps old shares for new shares in the acquiring company. Where the usual conditions are met and the shareholder receives only shares, there is no disposal. The new shares take over the old shares' cost and acquisition date, and the gain is deferred until the new shares are sold. If cash is also received, there is a part disposal. Calculate the cost of the part sold using A ÷ (A + B), where A is the cash and B is the value of the new shares. Gains are then taxed at 18% or 24%, after the £3,000 annual exempt amount. Business asset disposal relief or investors' relief can apply at 14% in the right cases.

Key rules to remember

Matching order for individuals: 1. Same day → 2. Next 30 days → 3. Section 104 pool; Apply the order to each disposal. Within the 30-day rule, match the earliest acquisition first.
Cost of shares sold from the pool: Allowable cost = Pool cost × Shares sold ÷ Shares in pool; Use the pool as it stands at the disposal date, after any bonus or rights issue and after matched shares are removed.
Gain on a share disposal: Gain = Proceeds − Allowable cost (matched separately for each matching group); Compute a separate gain for each group (same day, 30 day, pool), then add them up.
Bonus issue: New pool shares = old shares + bonus shares; pool cost unchanged; Only the number of shares in the pool changes.
Rights issue: New pool shares = old shares + rights shares; new pool cost = old cost + cash paid; Treated as part of the original holding, so it does not fall into the same day or 30-day rules.
Part-cash share-for-share exchange: Cost allocated to cash = Total cost × A ÷ (A + B); A = cash received, B = market value of new shares at the exchange. The cash portion is a part disposal, and the rest of the cost carries to the new shares.
CGT rates and exempt amount (2025/26): 18% or 24%; annual exempt amount £3,000; BADR and investors' relief 14%; The rate depends on the taxpayer's remaining basic rate band. The rates are given in the tax tables.

How to solve Share Disposals, Reorganisations and Share Matching questions

Use the same routine for any individual share disposal question. Do it in a table so that each share is used once.

1List every acquisition and disposal in date order, with the number of shares, cost or proceeds, and class of share.
2Identify each disposal date. Check for acquisitions on the same day and in the following 30 days.
3Match same day acquisitions first, then 30-day acquisitions (earliest first). Work out a gain or loss for each group using the proportion of the proceeds.
4Build the section 104 pool from the remaining earlier acquisitions. Add rights issues at the cash paid. Add bonus shares at nil cost.
5Match the rest of the disposal to the pool. Allow cost as pool cost × shares sold ÷ shares in pool. Then carry the reduced pool forward.
6For a takeover or reorganisation, decide whether there is a disposal. If only shares are received, carry the old cost across. If cash is received, use A ÷ (A + B).
7Add the gains and losses for the year. Deduct losses and the £3,000 annual exempt amount, then apply 18% or 24%, or 14% where a relief applies.
8Show every working. Label the tax year, because the supplementary instructions say to use 2025/26 rates.

Quickest way: Three-column matching grid

When to use it: Use this when a question has many purchases and sales and time is short.

Draw three columns: same day, 30 days, pool. Put the shares into the columns before calculating anything.
Cross-check the number of shares sold against the total across the three columns.
Calculate proceeds per share once and multiply by shares in each column.
In the pool column, write the pool as number | cost and update it after every event, so a rights issue or sale never gets missed.
Do the tax last. State the rate you are using and why.

Common mistakes in Share Disposals, Reorganisations and Share Matching

Adding shares bought within 30 days after a sale to the pool.
Students build the pool from all purchases first because it looks tidy.
Fix: Check the 30 days after each disposal first. Matched shares come out before the pool is used.
Applying the same day and 30-day rules to rights issue shares.
A rights issue involves a purchase, so it looks like a new acquisition.
Fix: Treat rights shares as part of the original holding. Add the shares and the cash paid to the pool.
Adding cost for bonus shares.
Students assume every new share has a price.
Fix: Bonus shares cost nothing. Increase the number of shares and leave total pool cost unchanged.
Taxing a share-for-share exchange as a disposal.
The old shares disappear, so it feels like a sale.
Fix: If only shares are received and the conditions are met, treat the new shares as the old ones. If cash is also received, use A ÷ (A + B) for the part disposal.
Deducting the full pool cost on a part-sale.
Students forget that the pool is shared across all shares.
Fix: Use pool cost × shares sold ÷ shares in pool, and carry the balance forward.
Forgetting the annual exempt amount or using the wrong rate.
Students rush to finish the share working and treat the tax as an afterthought.
Fix: Finish the computation: deduct losses and £3,000, then tax at 18% or 24% depending on the band left, or 14% if BADR or investors' relief applies.

Worked examples

Example 1

Freya buys 3,000 shares in Zed plc on 10 June 2016 for £6,000. In March 2019 she takes up a 1 for 3 rights issue at £3 per share. In 2021 there is a 1 for 4 bonus issue. On 20 October 2025 she sells 3,000 shares for £15,000. Freya is a higher rate taxpayer with no other gains in 2025/26. Calculate her CGT.

Show the solution

There are no purchases on the same day or within 30 days after the sale, so the whole disposal comes from the pool.
Rights issue: 3,000 ÷ 3 = 1,000 new shares at £3 = £3,000. Pool is now 4,000 shares, cost £9,000.
Bonus issue: 4,000 ÷ 4 = 1,000 shares at nil cost. Pool is now 5,000 shares, cost £9,000.
Allowable cost = £9,000 × 3,000 ÷ 5,000 = £5,400.
Gain = £15,000 − £5,400 = £9,600.
Less annual exempt amount £3,000 = £6,600.
Tax at 24% (higher rate) = £1,584.
Pool carried forward: 2,000 shares, cost £3,600.

Answer: Gain £9,600; taxable gain £6,600; CGT £1,584.

Example 2

On 12 December 2025, Raj sells 4,000 shares in Kay plc for £7 each (£28,000). His holding is a section 104 pool of 6,000 shares with cost £18,000. He bought 500 shares on 12 December 2025 for £3,100 and 1,000 shares on 2 January 2026 for £6,500. He is a higher rate taxpayer with no other gains. Calculate the gains and the CGT for 2025/26.

Show the solution

Same day: 500 shares. Proceeds 500 × £7 = £3,500. Cost £3,100. Gain £400.
30-day rule: 2 January 2026 is within 30 days after the sale, so 1,000 shares match. Proceeds 1,000 × £7 = £7,000. Cost £6,500. Gain £500.
Balance from the pool: 4,000 − 500 − 1,000 = 2,500 shares. Proceeds 2,500 × £7 = £17,500.
Pool cost = £18,000 × 2,500 ÷ 6,000 = £7,500. Gain £10,000.
Total gains = £400 + £500 + £10,000 = £10,900.
Less annual exempt amount £3,000 = £7,900.
CGT at 24% = £1,896.
Pool carried forward: 3,500 shares, cost £10,500.

Answer: Total gains £10,900; taxable gain £7,900; CGT £1,896.

Exam tips

Set out the matching as a table. Marks go for the order: same day, 30 days, pool. Method marks are available even if one figure is wrong.
Read every date. A purchase just after a disposal is a sign that the 30-day rule is being tested.
Do not forget that ATX questions often combine a share disposal with another issue, for example BADR, a takeover, or a gift. State each conclusion briefly in the scenario and say what you advise.
For a takeover, say whether the exchange is a disposal and explain why in one sentence. Examiners reward the reasoning as well as the number.
Use the rates and allowances in the tax tables provided. Do not rely on memory for the rate or the exempt amount.

Practice questions from Capital gains tax and trusts

Share Disposals, Reorganisations and Share Matching in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Applied SkillsShare Matching Rules for Individuals

Share Disposals, Reorganisations and Share Matching: frequently asked questions

What is the section 104 pool?

It is a single running record of the number of shares of one class in one company and their total cost. It holds acquisitions that are not matched under the same day or 30-day rules. When you sell from it, you allow a fraction of the total cost based on the number of shares sold.

How does the 30-day bed and breakfasting rule work?

If you sell shares and buy the same class of shares in the same company within the next 30 days, the sale is matched with that purchase. The gain or loss uses the actual cost of the new purchase, not the pool cost. This stops someone selling to use a loss or the annual exempt amount and then rebuying straight away.

How do I deal with a rights issue in CGT?

Treat the new shares as part of the original holding. Add the number of shares and the cash paid to the section 104 pool. The rights shares are not matched under the same day or 30-day rules.

Is a share-for-share exchange a disposal?

Where the conditions are met and the shareholder receives only shares, there is no disposal at the time. The new shares take the old shares' cost and acquisition date, so the gain is deferred. If cash is also received, there is a part disposal, and you split the cost using A ÷ (A + B).