Selling shares to raise capital triggers Capital Gains Tax at 18% or 24% depending on your income band, with just a £3,000 annual exempt amount to shield you. Borrowing against those same shares triggers no CGT at all – and if you hold them until death instead of ever selling, the gain can potentially be wiped out entirely. Understanding the genuine cost comparison between these two routes matters more than most people realise.
Why Borrowing and Selling Are Genuinely Different Tax Events
Capital Gains Tax only triggers on a genuine disposal of an asset – selling, gifting, or otherwise giving up ownership. Our Stock Loans page covers the broader product; this page focuses specifically on the genuine tax comparison between the two routes, since pledging shares as collateral for a loan isn’t a disposal at all, meaning no CGT arises simply from borrowing against them.
The Current CGT Rates Worth Knowing
Since the Autumn Budget 2024, gains on shares are taxed at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, with your gain stacking on top of your income to determine which rate applies to which portion. The annual exempt amount for 2026/27 remains frozen at £3,000, meaning considerably more of a typical gain is now taxable than it would have been just a few years ago.
A Genuine Worked Example: Selling vs Borrowing
Consider a higher-rate taxpayer holding £500,000 of shares with an original cost base of £200,000, needing to raise £150,000. Selling enough shares to raise this amount would realise a genuinely proportional gain, and after the £3,000 exempt amount, the remaining gain would be taxed at 24% – a real, immediate tax cost reducing how much you actually keep from the sale. Borrowing £150,000 against the same portfolio instead, structured through a Stock Loan, incurs no CGT at all – your only cost is the interest charged on the facility, which at a typical stock loan rate is a genuinely calculable, ongoing cost rather than an immediate tax hit.
Why the Comparison Isn’t Simply “Interest vs Tax”
It’s worth understanding this properly rather than assuming borrowing is automatically cheaper: a stock loan’s interest cost is genuinely ongoing for as long as the facility remains outstanding, while a CGT bill on a sale is a one-off cost paid once. Over a sufficiently long holding period, cumulative interest can exceed what the CGT bill would have been – the comparison genuinely depends on how long you expect to hold the loan, your specific interest rate, and how the pledged shares are expected to perform in the meantime.
The Genuine Estate Planning Argument Worth Understanding
This is arguably the single most powerful reason wealthy individuals use stock loans rather than selling: assets held until death typically receive a CGT uplift to their market value at that point, meaning any gain built up during your lifetime can potentially be wiped out entirely for CGT purposes, rather than being taxed on a lifetime sale. If your genuine intention is to pass a concentrated shareholding to the next generation eventually, borrowing against it now to fund a genuine need – a property purchase, business capital, or diversification into other assets – while never actually selling, can mean the original gain is never taxed at all during your lifetime.
Why This Matters More With a Genuinely Concentrated Position
If your wealth sits substantially in one company’s stock – common among founders, early employees, and long-term holders – a large lifetime sale can trigger a genuinely significant, immediate tax bill, given how much of the eventual proceeds represents pure gain rather than original cost. Borrowing against the position instead defers this entirely, worth discussing with a tax adviser alongside your broker if a significant proportion of your wealth sits in a single holding.
Using a Stock Loan to Fund a Property Purchase
A genuinely common, practical use of this comparison is funding a property purchase without triggering CGT on a share sale to raise the deposit. Our High Value Mortgages page covers the property finance side of this kind of combined structure, worth reading alongside this page if you’re weighing up funding a significant purchase through borrowing against your portfolio rather than liquidating part of it.
Diversifying Without Triggering a Disposal
If your genuine goal is reducing concentration risk in a single holding rather than raising cash for a specific purchase, it’s worth understanding that borrowing against the position and investing the proceeds elsewhere achieves genuine diversification of your overall wealth without the original holding itself ever being sold. Our Lombard Loans page covers borrowing against a genuinely diversified portfolio specifically, worth reading if this broader structuring question applies to your situation.
Why Crypto Holdings Follow a Genuinely Similar Logic
The same underlying principle applies to appreciated cryptocurrency holdings – borrowing against Bitcoin or Ethereum avoids triggering a disposal in the way selling would, worth understanding if a meaningful portion of your wealth sits in digital assets alongside conventional shares. Our Crypto-Backed Loans page covers this specific asset class, including the genuinely faster liquidation risk that comes with some crypto-backed structures compared with traditional stock loans.
Why This Isn’t a Universal Recommendation
It’s worth being honest that borrowing isn’t automatically the right answer simply because it avoids an immediate tax bill – genuine interest costs, margin call risk, and the fact that the underlying debt still needs eventually resolving all matter too. Our piece on margin call on a stock loan covers this genuine risk in full depth, worth reading alongside this tax comparison for a complete picture. This comparison is worth running properly for your specific numbers, timeline, and estate planning intentions, rather than assuming either route is universally superior.
Bed and ISA: A Genuinely Different, Smaller-Scale Alternative
For smaller positions, it’s worth knowing a “Bed and ISA” transaction – selling shares and immediately repurchasing them within a Stocks and Shares ISA – crystallises a gain now, ideally within your annual exempt amount, sheltering future growth from CGT entirely. This is a genuinely different strategy to a stock loan, worth considering for smaller holdings where borrowing wouldn’t be proportionate, though it doesn’t achieve the same immediate liquidity a stock loan provides.
Getting the Comparison Run Properly for Your Circumstances
Given how much genuinely depends on your specific gain, your income tax band, your realistic holding period, and your genuine long-term intentions for the shares, it’s worth having a proper conversation with a tax adviser and a securities lending specialist together, rather than assuming either selling or borrowing is automatically the right route. Get in touch with details of your portfolio and funding requirement, and we’ll help you understand the genuine comparison for your specific numbers.
Frequently Asked Questions
Does borrowing against my shares trigger Capital Gains Tax?
No – CGT only triggers on a genuine disposal, and pledging shares as collateral for a loan isn’t a disposal.
What are the current CGT rates on shares?
18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, with a £3,000 annual exempt amount for 2026/27.
Is a stock loan always cheaper than selling and paying CGT?
Not necessarily – interest is an ongoing cost that can exceed a one-off CGT bill over a sufficiently long holding period, so the comparison genuinely depends on your specific timeline and rate.
Why do wealthy individuals often borrow rather than sell?
Assets held until death typically receive a CGT uplift to market value, potentially eliminating the lifetime gain entirely if the shares are never sold during your lifetime.
Can I use a stock loan to diversify a concentrated position without selling it?
Yes – borrowing against the position and investing the proceeds elsewhere achieves genuine diversification of your overall wealth without disposing of the original holding.
Get in touch with details of your portfolio and funding requirement, and we’ll help you understand which route genuinely suits your circumstances.
