How Section 104 Pooling Works

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If you've sold shares in the UK, you've probably hit this question: which shares did I actually sell? You might have bought the same stock three times at three different prices. HMRC doesn't let you pick – instead, they use something called a Section 104 pool.

The idea in 30 seconds

All your shares of the same class in the same company go into one pool. The pool tracks two numbers:

  • How many shares you hold
  • What you paid for all of them combined (the "allowable cost")

When you buy more, both numbers go up. When you sell, you take out a proportional slice of the cost. That slice becomes your "cost basis" for the disposal – and HMRC uses it to calculate your gain or loss.

Worked example

You make three trades in Acme plc:

DateActionSharesPriceTotal
10 Jan 2025Buy200£5.00£1,000
15 Mar 2025Buy300£6.00£1,800
20 Aug 2025Sell100£8.00£800

Here's how the pool works visually:

BUY
200 @ £5.00
= £1,000
BUY
300 @ £6.00
= £1,800
POOL
500 shares
£2,800 total
avg £5.60
SELL
100 shares
cost: £560
GAIN: £800 − £560 = £240

Two buys go into the pool. The pool averages the cost at £5.60 per share. When you sell 100 shares, the allowable cost is 100 × £5.60 = £560. After the sale, 400 shares remain with £2,240 of cost.

Where Section 104 fits in the matching rules

HMRC applies three rules in order when you sell shares. Section 104 is the last resort:

  1. Same Day Rule – shares bought on the same day as the sale are matched first
  2. Bed & Breakfast Rule – shares bought within 30 days after the sale are matched next
  3. Section 104 Pool – everything else comes from the pool

In practice, most sales end up matched against the pool. Same-day and 30-day matches only kick in when you buy and sell the same stock in quick succession.

What goes into the cost?

The cost you add to the pool isn't just the share price. You can include:

  • Dealing fees and broker commissions
  • Stamp Duty Reserve Tax (SDRT) – 0.5% on UK share purchases

For shares denominated in foreign currencies, the sterling cost on the date of purchase is what enters the pool, using HMRC's official exchange rates.

Why it matters

Getting the pool calculation wrong means reporting the wrong gain or loss on your Self Assessment. For anyone with more than a handful of trades per year, manual tracking gets error-prone fast – especially once you add stock splits, rights issues, and foreign currency conversions.

Our CGT Calculator handles Section 104 pooling automatically – along with same-day and bed & breakfast matching, FX conversion, and corporate actions. Upload your broker data and see your report in seconds.

Further reading