The Section 104 pool, explained
This is the most common situation in UK Capital Gains Tax: you bought the same share more than once, at different prices, and now you've sold some. How do you know what each sold share “cost”? HMRC's answer is the Section 104 pool (it's called “Section 104” only because that's the part of UK tax law describing it — the number is just a label you never have to quote anywhere). By the end of this guide you'll be able to work out the gain by hand, then check it in the calculator.
When you sell shares, HMRC has to decide which of your purchases the sold shares came from — because that sets the cost. It always works through three rules in this fixed order, top to bottom, until the whole sale is accounted for:
- Same-day rule — shares of the same company you bought on the very day you sold.
- Bed & breakfast (30-day) rule — shares you bought back in the 30 days after the sale.
- Section 104 pool — this page — everything left over, at your blended average cost.
The idea in one sentence
When you buy the same share several times, HMRC stops treating those purchases as separate lots and instead merges them into one big “pot” — the pool — which remembers only two things: the total number of shares you hold and the total amount you paid for them. When you sell, the allowable cost is that average cost per share times the number sold — not the price of any particular lot you bought.
Why a pool at all?
Imagine buying the same fund every month for years. Tracking which exact shares you sold would be a nightmare. The pool sidesteps that: every share in the pool is treated as having the same average cost. Sell some, and they simply come out of the pool at that average.
The pool is only reached after two priority rules. HMRC matches a disposal first against any shares bought on the same day, then against shares bought in the next 30 days (the bed & breakfast rule), and only what remains is matched against the pool.
Our worked example
We'll follow one investor and one share, BP. They make two purchases and then one sale. Everything is in pounds, with no dealing fees, so we can focus purely on how the pool works. This is the exact example the “Try this example” button below loads into the calculator.
| Date | Type | Symbol | Qty | Price | Fees | Ccy | FX Rate | GBP Value |
|---|---|---|---|---|---|---|---|---|
| 1 Jun 2024 | Buy | BP | 100 | £5.00 | £0.00 | GBP | 1.00 | £500.00 |
| 1 Sep 2024 | Buy | BP | 100 | £7.00 | £0.00 | GBP | 1.00 | £700.00 |
| 1 May 2026 | Sell | BP | 150 | £8.00 | £0.00 | GBP | 1.00 | £1,200.00 |
Working it out, step by step
First purchase — the pool starts
On 1 June 2024 our investor buys 100 BP shares at £5.00 each. The pool is empty before this, so this purchase simply becomes the whole pool: 100 shares that cost £500.00 in total.
Section 104 pool now holds
Average cost per share = £500.00 ÷ 100 = £5.00. Nothing has been sold, so there's no gain yet — buying shares is never a taxable event.
Second purchase — the average shifts
On 1 September 2024 they buy another 100 BP shares, this time at £7.00 each (£700.00). We add these shares and their cost to the pool. The pool now holds 200 shares that cost £1,200.00 in total — so the average cost per share has moved to somewhere between £5.00 and £7.
Section 104 pool now holds
Every share in the pool is now treated as having cost £6.00 — even though some were bought at £5.00 and some at £7.00. That single average is the whole point of the pool.
The sale — shares leave at the average cost
On 1 May 2026 they sell 150 of their 200 BP shares at £8.00 each, receiving £1,200.00 (you can sell part of a holding — the other 50 just stay in the pool). To find the gain, HMRC asks: what did those 150 shares cost? Because they come out of the pool, the cost is 150 × the pool's average cost of £6.00. That figure is the allowable cost — the tax term for the part of what you paid that HMRC lets you subtract from the proceeds.
What's left in the pool
We took 150 shares out, so 50 remain. We also remove their share of the cost: 150 × £6.00 = £900.00 leaves the pool. The average cost per share doesn't change when you sell — only the totals shrink.
Section 104 pool now holds
50 shares left, £300.00 of cost left, still £6.00 average. Those 50 shares keep their £6.00 cost ready for whenever they're sold in future.
The result
What to remember
- A pool holds total shares and total cost for one share. Buying adds to both; the average is just total cost ÷ total shares.
- When you sell, the cost of the shares sold is the average cost × the number sold.
- Dealing fees are added to the cost when you buy and subtracted from the proceeds when you sell.
- The pool is the last rule HMRC reaches. The same-day and bed & breakfast rules take priority when they apply — and you can see all three at once in the combined walkthrough.
Related: getting started with CGT, rates & allowances, or see more worked examples.
Sources
The rules and figures in this guide come from HMRC and GOV.UK. This site is independent and not affiliated with HMRC.
- HMRC Capital Gains Manual CG51575 — The Section 104 holding (pool) in detail: pooled cost and part-disposal apportionment.
- HMRC Capital Gains Manual CG51550 — Outline of the share identification (matching) rules from 6 April 2008.
- GOV.UK — Tax when you sell shares — When CGT applies to selling shares and units, and which disposals are exempt.