Yes, you pay capital gains tax on AIM shares held outside a tax wrapper. Profits are taxed at 18% if you are a basic-rate taxpayer and 24% if you fall into the higher or additional-rate band, and only the portion of your gains above the £3,000 annual exempt amount is chargeable. These rates apply from 6 April 2025 and continue for the 2026–27 tax year.
The Rates and Your Annual Allowance
Which rate applies depends on your total taxable income for the year. Add the gain to your other income: the slice that sits within the basic-rate band is taxed at 18%, and anything above is taxed at 24%.1HM Revenue & Customs. Capital Gains Tax Rates and Allowances A gain that straddles the two bands is split, with each part taxed at its own rate.
Every individual gets £3,000 of gains tax-free each year through the Annual Exempt Amount.2GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances You calculate tax only on what exceeds it. The allowance does not roll over, so spreading disposals across tax years is one of the simplest ways to trim the total bill on a larger AIM portfolio.
Working Out the Gain
AIM shares are treated as unquoted securities for most tax purposes, even though they trade on a recognised stock exchange. Under Section 104 of the Taxation of Chargeable Gains Act 1992, all shares of the same class in the same company are pooled and treated as a single asset.3Legislation.gov.uk. Taxation of Chargeable Gains Act 1992 – Section 104
The pool records the total number of shares and their total allowable cost. Each purchase adds to both figures. When you sell, you take the average cost per share from the pool and multiply by the number sold to get the allowable cost of that disposal. If your pool holds 2,000 shares that cost £10,000 in total and you sell 500, the allowable cost is £2,500. Your gain is the sale proceeds minus that £2,500.
Keep dated records of every buy and sell, the number of shares, and the price paid. HMRC can query cost figures years later, and rebuilding a pool from patchy broker statements is where errors creep in.
How to Hold AIM Shares Free of CGT
AIM shares qualify as eligible investments inside a stocks and shares ISA because they are admitted to trading on a recognised stock exchange in the UK.4GOV.UK. Stocks and Shares ISA Investments for ISA Managers They can also sit inside a Self-Invested Personal Pension. Gains on shares held in either wrapper are free of CGT, whatever the size.
The current ISA subscription limit is £20,000 across all your ISAs, with no tax charge on withdrawal. A pension locks the money away until at least age 55 (rising to 57 from 2028), but growth inside compounds free of CGT and free of income tax on dividends.
There is a real trade-off. Losses on shares inside an ISA cannot be set against gains you make outside it.5GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances – If You Make a Loss If an AIM company inside the ISA collapses, the loss delivers no tax benefit. Some investors deliberately hold their most speculative AIM positions outside the ISA so that a wipeout can at least offset gains elsewhere.
One boundary: US citizens and green card holders living in the UK do not get the ISA shelter for US tax purposes. The IRS looks through the wrapper and taxes dividends, interest, and capital gains inside as if the account did not exist, and separate reporting obligations under FBAR and FATCA may apply.6FinCEN.gov. Report Foreign Bank and Financial Accounts Dual-national investors should get cross-border tax advice before opening an ISA for AIM stocks.
Offsetting Losses From AIM Investments
Smaller companies fail more often than main-market peers, so losses are part of the picture. A loss on an AIM disposal reduces your total taxable gains for the year, and current-year losses come off before the £3,000 annual exempt amount is applied.5GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances – If You Make a Loss
If losses exceed gains in a year, the surplus can be carried forward indefinitely against future gains. You have to claim the loss, though: either through Self Assessment or in writing to HMRC. If you do not usually file a return, the deadline is four years from the end of the tax year in which the loss arose. Miss it and the loss is gone.
A subtlety trips people up. Current-year losses must be set against all gains in that year, even if that wastes the annual allowance. Carried-forward losses are more flexible: you only need to use enough to bring your net gain down to the exempt amount. The order in which you crystallise gains and losses across tax years matters.
Reliefs That Can Lower the Rate
Two reliefs can cut the CGT rate on AIM share disposals, though both have been narrowed. Each now charges 18% on qualifying gains from 6 April 2026, matching the standard basic rate. In practice, they only save tax for higher-rate and additional-rate taxpayers, who would otherwise pay 24%.
Business Asset Disposal Relief
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is for people closely involved with the company. You need to be an employee or officer and hold at least 5% of the shares and voting rights for a continuous two-year period before sale.7GOV.UK. Business Asset Disposal Relief The company must also be a trading company throughout that period.
The rate on qualifying gains is 18% for disposals on or after 6 April 2026.8GOV.UK. CG64174 – Business Asset Disposal Relief: Rates From April 2025 There is a lifetime cap of £1 million in qualifying gains across every claim you ever make.9GOV.UK. HS275 Business Asset Disposal Relief (2024) Gains above the cap are taxed at the normal CGT rates.
Investors’ Relief
Investors’ Relief is designed for external backers, not insiders. It applies to newly issued shares in unlisted trading companies held for at least three years from issue. Neither you nor anyone connected to you can be an employee during the holding period, though an unpaid directorship does not automatically disqualify you.10HM Revenue & Customs. Investors’ Relief 2025 (HS308)
The rate is 18% from 6 April 2026.11GOV.UK. CG63515 – Investors’ Relief: Rates From April 2025 and From April 2026 The lifetime limit on qualifying gains is £1 million, down from £10 million for disposals made before 30 October 2024.10HM Revenue & Customs. Investors’ Relief 2025 (HS308)
Reporting and Paying
Gains on AIM shares are reported through Self Assessment. Report by 31 December in the tax year after the disposal and pay by the following 31 January. A gain in 2025–26 has to be reported by 31 December 2026 and paid by 31 January 2027.12GOV.UK. Report and Pay Your Capital Gains Tax: If You Have Other Capital Gains to Report You can also use the real-time Capital Gains Tax service on GOV.UK if you are eligible.13GOV.UK. Reporting and Paying Capital Gains Tax
Missing the filing deadline triggers an automatic £100 penalty even if there is no tax to pay. After three months, daily £10 penalties start, capped at £900. At six months, another charge of 5% of the outstanding tax or £300 (whichever is greater) applies, and the same again at twelve months.14GOV.UK. Self Assessment Tax Returns: Penalties Interest runs on any unpaid tax from the due date. The penalties stack fast.
Two Related Taxes Worth Knowing About
AIM shares are exempt from stamp duty reserve tax on purchase. Main market share purchases typically attract 0.5% on the transaction value, but because AIM shares are admitted to trading on a recognised growth market rather than formally listed, they fall outside the definition of chargeable securities under the Finance Act 1986.15GOV.UK. Growth Market Shares – SDRT Exemption For frequent traders that saving adds up.
Inheritance tax treatment has changed. AIM shares used to qualify for 100% Business Property Relief after being held for two years, letting them pass to heirs free of IHT. From 6 April 2026, shares traded on recognised stock exchanges, including AIM, qualify for only 50% Business Property Relief.16GOV.UK. Unlisted Stocks and Shares and Control Holdings Schedule IHT412 Half the value of qualifying AIM holdings is now exposed to the 40% IHT rate, which is worth factoring in if inheritance planning was part of the reason for holding AIM shares in the first place.