Section 104 Pool: Average Cost Basis for Shares

The Section 104 pool (sometimes called the "Section 104 holding" or simply the "share pool") is the mechanism HMRC uses to calculate the cost basis of shares when you sell them. Established by TCGA 1992 s.104 and explained in HMRC's Capital Gains Manual at CG51570, it operates as a running weighted average of the cost of all shares of the same class in the same company that you hold. After the same-day rule and 30-day rule have been applied, any remaining shares in a disposal are matched against this pool.

In short: add each purchase and its costs to the pool, and when you sell, take out the same fraction of the pool's total cost as the fraction of shares you sell. Your pool follows you, not your broker, so moving shares to a new platform does not reset it. The section on transferring between brokers covers the records you need.

How the Section 104 pool works

As described in HMRC Helpsheet HS284 (Shares and Capital Gains Tax), the pool tracks two figures for each holding:

• The number of shares in the pool.
• The total allowable cost of those shares (including acquisition costs such as dealing fees and stamp duty).

From these two figures, you can derive the average cost per share at any point in time by dividing the total cost by the number of shares.

Worked example - building and drawing from a pool

Rachel invests in FundCo plc over several years. Here are her transactions:

Purchase 1 - 10 January 2022

Rachel buys 200 shares at £8.00 each. Broker fee: £10. Stamp duty: £8.

Average cost per share: £1,618 / 200 = £8.09.

Purchase 2 - 5 June 2023

Rachel buys another 300 shares at £10.00 each. Broker fee: £10. Stamp duty: £15.

Average cost per share: £4,643 / 500 = £9.286.

Purchase 3 - 20 February 2024

Rachel buys 500 shares at £12.00 each. Broker fee: £10. Stamp duty: £30.

Average cost per share: £10,683 / 1,000 = £10.683.

Sale - 15 November 2024

Rachel sells 400 shares at £14.00 each. No same-day or 30-day purchases are made. The shares are matched entirely against the Section 104 pool.

• Proceeds: 400 x £14.00 = £5,600
• Cost from pool: (400 / 1,000) x £10,683 = £4,273.20
• Gain: £5,600 - £4,273.20 = £1,326.80

The average cost per share remains £10.683. The ratio is always preserved when shares are removed from the pool.

Each holding has its own pool

You maintain a separate Section 104 pool for each class of share in each company or fund. Shares in Company A and shares in Company B have entirely separate pools. Likewise, ordinary shares and preference shares in the same company are different classes and have separate pools.

For fund investors, each individual fund (e.g., a Vanguard FTSE 100 tracker and a Vanguard Global All Cap fund) has its own Section 104 pool. Different share classes of the same fund (e.g., accumulation vs. income units) are also treated separately.

The pool is per person, not per broker. If you hold the same class of shares in the same company at two brokers in taxable accounts, both holdings form one Section 104 pool. Sales at either broker draw on the combined average cost, so you need the purchase history from both. Shares held in an ISA or SIPP are outside Capital Gains Tax and do not join the pool.

Transferring shares between brokers: what happens to your pool

Moving a holding to another platform as shares (an "in specie" or re-registration transfer) is usually not a sale for Capital Gains Tax. Brokers hold your shares through a nominee company, and HMRC treats assets held by a nominee as belonging to you, the beneficial owner (TCGA 1992 s.60; HMRC Capital Gains Manual CG34320). HMRC's manual at CG10720 states that moving legal ownership between a nominee and the beneficial owner is not a disposal. When you stay the beneficial owner throughout, there is no gain or loss on the move, and your pool carries on with the same number of shares and the same total cost.

Two common variations are different. A cash transfer, where the old broker sells and the new broker buys, is a disposal and a fresh purchase. A "Bed and ISA" move is a sale in your taxable account followed by a purchase inside the ISA.

Records to keep when you move a holding

• Every purchase from the old broker: date, quantity, price, dealing fees and stamp duty. Contract notes or a full transaction export are best.
• Every earlier sale of the holding, because each one reduced the pool.
• Corporate actions such as splits, consolidations and rights issues that changed the share count or cost.
• The transfer statements from both brokers showing the quantity moved and the date.

Download the old broker's full history before you close the account, because access to statements can end when an account closes. If records are lost, HMRC's record-keeping guidance says you must try to recreate them, and show on your return which figures are estimated. On SA108 that means putting an X in box 53 and explaining the estimate. See our SA108 guide for where pooled costs are reported.

How the same-day and 30-day rules interact with the pool

The Section 104 pool is the residual matching rule. It only applies to shares that are not already matched by the same-day rule or the 30-day rule. When those rules match shares:

• Same-day purchases: Shares bought on the same day as a sale are matched to that sale and never enter the Section 104 pool (unless there are excess shares after matching).
• 30-day repurchases: Shares bought within 30 days of a sale are matched to that sale. They do not enter (or re-enter) the pool. Any excess repurchased shares not needed for matching are added to the pool.

Fees and allowable costs

The following costs should be added to the Section 104 pool when shares are acquired:

• Purchase price - the amount paid for the shares.
• Broker dealing fees - commission or transaction fees charged by your broker.
• Stamp duty - 0.5% stamp duty reserve tax on UK share purchases.
• PTM levy - include any Panel on Takeovers and Mergers levy charged on the purchase. The levy increased to £1.50 on qualifying trades worth more than £10,000 from 2 December 2024. See the Takeover Panel's announcement.

Corporate actions

Certain corporate events affect the Section 104 pool:

• Stock splits: If a company does a 2-for-1 split, the number of shares in the pool doubles but the total cost stays the same. The average cost per share halves.
• Consolidations (reverse splits): The opposite of a split - fewer shares at a higher cost per share, but the same total cost.
• Rights issues: If you take up a rights issue, the new shares and their cost are added to the pool. If you sell the rights (nil paid), the proceeds are treated as a part disposal.
• Bonus issues (scrip issues): New shares received for free are added to the pool at zero cost, which reduces the average cost per share.
• Takeovers and mergers: If you receive shares in a new company in exchange for shares in the old company, the cost basis transfers to the new holding. The Section 104 pool is effectively re-denominated.

Why average cost, not FIFO?

Many countries (including the United States) use a "first in, first out" (FIFO) method for matching share disposals - meaning the oldest shares are deemed to be sold first. Under TCGA 1992, the UK does not use FIFO for shares held by individuals. Instead, the Section 104 pool prescribed by s.104 uses a weighted average cost method, as confirmed in HMRC's share identification guidance at CG51560.

The average cost method simplifies the calculation when an investor has made many purchases over time. Rather than tracking every individual lot, you maintain a single running pool. It also prevents investors from selectively choosing which shares to sell to minimise their tax liability.

The one exception is that the same-day and 30-day rules effectively override the pool in specific circumstances, creating a hybrid system.

How FiscalFox tracks Section 104 pools

FiscalFox automatically builds and maintains Section 104 pools for every holding in your portfolio based on your uploaded transaction history. Each purchase is added to the appropriate pool (including fees and stamp duty), and each sale draws from the pool after the same-day and 30-day rules have been applied. The platform provides a full audit trail showing the pool balance before and after each transaction.

If you have moved brokers, upload the history from the old broker as well as the new one, so the original purchases sit in the same pool. If a sale has no purchase history behind it, FiscalFox keeps it out of your report totals and asks for the missing cost rather than assuming one.