Section 104 Pooling and the 30-Day Rule: Share Identification for UK Advisers
Published by 
Steffan Kharmaaiarvi, founder
When a UK client sells shares or fund units held in a general investment account, the gain depends on which purchases the sale is matched with. UK law does not use first in, first out: it matches a sale with same-day purchases, then purchases in the next 30 days, and only then with the Section 104 pool at its average cost. This note sets out the three rules, why ISA and SIPP purchases sit outside them, and a worked example.
The order of identification
- Same day. Where securities of the same class are acquired and disposed of on the same day in the same capacity, the acquisitions are treated as one, and matched with the disposal up to its quantity (TCGA 1992 s.105(1)).
- The next 30 days. If within thirty days after the disposal the person acquires securities of the same class, the disposal is identified with those, earlier acquisitions before later ones (s.106A(5)). Earlier disposals are matched before later ones (s.106A(4)).
- The Section 104 holding. Securities of the same class acquired by the same person in the same capacity are regarded as indistinguishable parts of a single asset, growing or diminishing as shares are bought and sold (s.104(1)). On a part disposal the allowable cost is the shares sold divided by the shares in the holding, times the pool's cost (HMRC HS284).
HS284 lists the same order, calling the second rule the "bed and breakfasting" rule, and adds that any shares still unmatched are matched with later acquisitions, earliest first. Its effect is that selling and buying back within 30 days does not reset the cost: the sale is matched with the repurchase, not with the pool.
ISAs and SIPPs sit outside the pool
The Individual Savings Account Regulations 1998, reg. 34 adapt the share identification rules so that they apply separately to securities held as account investments, as if the investor held them in a capacity other than any other securities of the same class. A purchase inside an ISA is therefore not matched with a sale in a general account. That is why "bed and ISA" (selling in the general account and buying back in the ISA) realises the gain or loss rather than being cancelled by the 30-day rule; the allowances side is covered in UK dividend allowance, CGT exempt amount and bed and ISA.
Investments in a SIPP are held for the purposes of a registered pension scheme, and a gain on them is not a chargeable gain (TCGA 1992 s.271(1A)). They form no part of the client's own Section 104 holding.
Non-resident purchases
The 30-day rule does not require a sale to be matched with securities acquired while the person is not UK resident, or is UK resident but treaty non-resident (s.106A(5A)); HS284 says the same. For a client leaving the UK, a repurchase after departure is not matched with a sale made before it. See leaving the UK for the rules that follow a client abroad.
Foreign currency
For shares bought in dollars or euros, the cost is the sterling equivalent at the exchange rate at the date of acquisition, and proceeds are converted at the date of disposal. HMRC's CG78310 cites Bentley v Pike for the principle and notes that HMRC does not prescribe the reference rate, expecting a reasonable and consistent method. A gain in sterling can differ from the gain in the share's own currency.
A worked example (illustrative)
A higher-rate taxpayer holds shares of one company in a general account: 1,000 bought in 2018 for £10,000 and 500 bought in 2021 for £8,000, so the pool is 1,500 shares at £18,000. Costs include dealing charges. On 11 May 2026 the client sells 1,000 shares for £20,000 and, the same day, buys 100 for £2,000. On 1 June 2026, 21 days later, the client buys 400 for £7,600.
| Shares sold matched with | Rule | Shares | Cost |
|---|---|---|---|
| Purchase on 11 May 2026 | Same day (s.105) | 100 | £2,000 |
| Purchase on 1 June 2026 | Next 30 days (s.106A) | 400 | £7,600 |
| Section 104 pool | 500 ÷ 1,500 × £18,000 | 500 | £6,000 |
| Total | 1,000 | £15,600 | |
The gain is £20,000 − £15,600 = £4,400. The pool afterwards holds 1,000 shares at £12,000, which is exactly what the client still owns.
Now suppose the 400 shares on 1 June are bought inside the client's ISA instead. They are held in a different capacity, so the sale matches the 100 same-day shares (£2,000) and then 900 from the pool (900 ÷ 1,500 × £18,000 = £10,800). The cost is £12,800 and the gain £7,200; the general account's pool keeps 600 shares at £7,200.
With no other gains in 2026-27, the £3,000 annual exempt amount and the 24% rate (HMRC, CGT rates and allowances) give tax of (4,400 − 3,000) × 24% = £336 in the first case and (7,200 − 3,000) × 24% = £1,008 in the second. Neither is better in itself: the second realises more gain now and moves 400 shares into the ISA, where later gains are free of tax.
Common mistakes
- Using a broker's first-in, first-out figure. Statements from non-UK brokers may show first-in, first-out lots; the UK computation is different.
- Pooling account by account. The pool is the person's, across their general accounts held in the same capacity.
- Matching ISA purchases. They are outside the rule.
- Converting at today's rate. Each purchase is converted at its own date.
- Forgetting excess reportable income. For offshore reporting funds it adds to the cost; see excess reportable income.
What Borderfolio shows
- The UK rule, replayed. Confirmed transactions in every account without a wrapper are replayed as one pool per person: same-day purchases first, then purchases in the next 30 days earliest first, then the Section 104 holding at average cost, each purchase at its own date's exchange rate.
- ISAs and pensions apart. Purchases in accounts marked as an ISA or a SIPP are not matched, so bed and ISA keeps the gain.
- Excess reportable income. Catalogued figures for offshore reporting funds are added to the pool's cost at each period end.
- Where it is used. The cost of a switch in Scenarios (the gain, Capital Gains Tax at the client's rate and dealing costs), the gain held in general accounts when a client plans to leave the UK, and cost in two currencies for US persons living in the UK (cross-border findings).
Not modelled: the non-resident exception in s.106A(5A) is not applied purchase by purchase; a holding missing from the transactions, or with a different quantity, shows its cost as unknown rather than a guess; this is not a Capital Gains Tax computation for the year, so other gains, losses brought forward and reliefs belong to the client's return.
Sources: TCGA 1992 s.104, s.105, s.106A, s.271, HMRC HS284 Shares and Capital Gains Tax, ISA Regulations 1998 reg. 34, HMRC CG78310, HMRC, CGT rates and allowances.
Frequently asked questions
What is a Section 104 holding?
Shares of the same class acquired by the same person in the same capacity are treated as one asset that grows and shrinks as shares are bought and sold (TCGA 1992 s.104). A part disposal takes the same fraction of the pool's total cost.
In what order are shares identified on a sale?
First with shares of the same class bought the same day, then with shares bought in the 30 days after the sale (earliest first), then with the Section 104 holding (TCGA 1992 s.105 and s.106A; HMRC HS284).
Does the 30-day rule apply if the client buys back inside an ISA?
No. ISA investments are treated as held in a different capacity from other holdings of the same class, so an ISA purchase is not matched with a sale in a general account (ISA Regulations 1998, reg. 34).
Does the 30-day rule apply after a client leaves the UK?
Not to shares acquired while the client is not UK resident or is treaty non-resident (TCGA 1992 s.106A(5A)).