{"id":322,"date":"2026-09-07T09:00:00","date_gmt":"2026-09-07T09:00:00","guid":{"rendered":"https:\/\/taxbull.co.uk\/blog\/?p=322"},"modified":"2026-09-07T09:00:00","modified_gmt":"2026-09-07T09:00:00","slug":"fifo-vs-pooling-uk-us-tax","status":"publish","type":"post","link":"https:\/\/taxbull.co.uk\/blog\/fifo-vs-pooling-uk-us-tax\/","title":{"rendered":"FIFO vs Pooling \u2014 Why UK Tax Rules Don’t Work Like US Rules"},"content":{"rendered":"

If you’ve ever Googled “how to calculate capital gains on shares,” most results assume you’re American. They’ll tell you about FIFO, LIFO, and specific identification. None of that applies in the UK. Using the wrong method is one of the most common CGT mistakes<\/a> \u2014 and it can produce wildly different results.<\/p>\n

How the US does it<\/h2>\n

In the US, investors can choose their cost basis method. The most common is FIFO<\/strong> (first-in, first-out) \u2014 when you sell shares, the oldest ones are treated as sold first. Some investors use specific identification<\/strong> \u2014 they choose exactly which lot to sell, often picking the highest-cost lot to minimise gains. The IRS allows this flexibility under IRC \u00a71012<\/a>.<\/p>\n

How the UK does it<\/h2>\n

HMRC gives you no choice. The matching rules are mandatory, applied in a fixed order described in Helpsheet HS284<\/a>:<\/p>\n

1. Same-day acquisitions (TCGA s.105)
\n2. Acquisitions in the next 30 days \u2014 the bed and breakfast rule<\/a> (TCGA s.106A)
\n3. The Section 104 pool<\/a> \u2014 weighted average cost (TCGA s.104)<\/p>\n

There’s no FIFO. There’s no choosing which lot to sell. The pool averages everything together.<\/p>\n

Why the numbers differ<\/h2>\n

Consider this scenario:<\/p>\n\n\n\n\n\n\n\n
Date<\/th>\nAction<\/th>\nShares<\/th>\nPrice<\/th>\n<\/tr>\n<\/thead>\n
Jan 2023<\/td>\nBuy<\/td>\n100<\/td>\n\u00a35.00<\/td>\n<\/tr>\n
Jun 2024<\/td>\nBuy<\/td>\n100<\/td>\n\u00a312.00<\/td>\n<\/tr>\n
Mar 2025<\/td>\nSell<\/td>\n100<\/td>\n\u00a315.00<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

FIFO (US method):<\/strong> Sell the oldest shares (Jan 2023 at \u00a35). Gain = \u00a315 \u2212 \u00a35 = \u00a310 per share. Total gain: \u00a31,000<\/strong>.<\/p>\n

S104 pool (UK method):<\/strong> Pool has 200 shares, total cost \u00a31,700, average \u00a38.50. Sell 100 at \u00a315. Cost = 100 \u00d7 \u00a38.50. Gain: \u00a3650<\/strong>.<\/p>\n

That’s a 35% difference in the taxable gain \u2014 from the same trades. At 18% CGT, that’s \u00a363 more tax under FIFO. The difference can be even more extreme with volatile stocks where purchase prices vary widely.<\/p>\n

Why it matters for UK investors on US brokers<\/h2>\n

If you use Robinhood<\/a> or Tastytrade<\/a>, their built-in gain\/loss reports use FIFO (or specific identification). These numbers are wrong for your UK return<\/strong>. See our detailed UK vs US comparison<\/a>.<\/p>\n

You cannot use the 1099-B figures from a US broker on your SA108. You must recalculate from scratch using HMRC rules. This is non-negotiable \u2014 HMRC’s method is mandatory, as the Capital Gains Manual at CG51560<\/a> makes clear.<\/p>\n

Can FIFO ever be better for the taxpayer?<\/h2>\n

Sometimes. If your earliest purchases were at a high price (you bought the top and the price dropped, then recovered), FIFO produces a smaller gain than pooling. But you don’t get to choose \u2014 the UK method is the UK method, regardless of which produces a smaller tax bill.<\/p>\n

The only legitimate way to influence your cost basis in the UK is through the bed and ISA<\/a> or bed and spouse<\/a> strategies, which reset the cost basis within the rules.<\/p>\n

Get it right automatically<\/h2>\n

TaxBull<\/a> applies HMRC’s pooling rules \u2014 not FIFO. Upload your broker CSV and get the correct UK calculation, with a full audit trail showing the pool state after every transaction. It’s the difference between filing correctly and filing a return that uses the wrong country’s rules.<\/p>\n

This is general information. The matching rules are set by legislation and are mandatory for all UK taxpayers.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

A clear comparison of FIFO (US) vs Section 104 pooling (UK) for calculating capital gains tax on shares. Why using the wrong method produces incorrect results.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[181,179,180,8,184,183,182],"class_list":["post-322","post","type-post","status-publish","format-standard","hentry","category-cgt-guides","tag-average-cost","tag-fifo","tag-pooling","tag-section-104","tag-share-identification","tag-uk-rules","tag-us-rules"],"_links":{"self":[{"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/posts\/322","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=322"}],"version-history":[{"count":1,"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/posts\/322\/revisions"}],"predecessor-version":[{"id":367,"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/posts\/322\/revisions\/367"}],"wp:attachment":[{"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxbull.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}