From gross proceeds to capital that compounds
A sale of shares, a business, an IPO or an inheritance: costs, debt, capital gains tax, spending, reserve and the months in cash before investing, then what the invested capital becomes.
By Eldar Edmond Grady, CEO, PPLI.com · Research checked 23 September 2026
The sale is taxed once; the plan after it decides the rest
The gain on a sale is a capital gain at 24%, or 18% within Business Asset Disposal Relief, whatever happens to the proceeds. A policy bought with the proceeds does not change the tax on the sale.
If part of the proceeds goes into a policy after the sale, the tax on that part is deferred from then on, in exchange for the policy's charges and income tax on the gain at the end. Capital invested directly pays UK tax each year. Step seven of the instrument compares the two on your figures.
£10,000,000 of proceeds, £1,000,000 base cost, 2% costs
A hypothetical sale, worked through line by line.
Amount realised 10,000,000 − 2% = 9,800,000
Gain 9,800,000 − 1,000,000 = 8,800,000
CGT at 24% 24% x 8,800,000 = £2,112,000
Half taxed as income at 45%
45% x 4,400,000 + 24% x 4,400,000 = £3,036,0009,800,000 − 2,000,000 − 2,112,000 − 200,000 − 500,000 = £4,988,000Less than half the headline figure reaches the portfolio in this case. Long-term wealth compounds on £4,988,000, not £10,000,000.
The sequence the planner applies
At completion
Transaction costs reduce the amount realised and the gain. Debt repaid is a use of proceeds, not a reduction of the gain. Tax on the gain at the event rate, with any share you mark as income at the savings rate.
The wait
Capital already taxed earns the cash rate, taxed at the savings rate, until it is invested. The cost is what that capital would have earned invested.
Inheritance
No CGT on death: assets pass at market value (HS282). Inheritance tax is outside this instrument, and the preset leaves the event rate at 0.
A policy after the sale
Its gain is taxed at the policy exit rate on encashment or death; no gain on the sale is deferred.
Common questions
Can a charitable gift reduce the CGT?
A cash gift from the proceeds does not reduce the CGT on the sale in this model. Gifts of shares before a sale and Gift Aid depend on facts the model cannot see; the planner lets you enter the effect once your adviser has confirmed it.
Instruments and related reading
Offshore bond break-evenThe year a policy pays for its charges, if it doesOpen →Wealth simulatorThe whole horizon, with withdrawals, fees and taxOpen →Tax drag calculatorThe annual tax cost, asset class by asset classOpen →Inheritance tax and successionWhat a policy does and does not change on deathOpen →Structure intelligenceWhen policy charges are smaller than the tax deferredOpen →PPLI.com is not authorised by the Financial Conduct Authority and does not give personal advice. This is general information about UK law, not an invitation or inducement to enter into any insurance or investment contract. Policies issued by insurers outside the UK are not protected by the Financial Services Compensation Scheme (unless written through a UK branch).
The authorities this page relies on
Capital gains tax rates
18 and 24% for disposals on or after 30 October 2024. Business Asset Disposal Relief at 18% from 6 April 2026. Annual exempt amount £3,000. gov.uk, CGT rates
HMRC helpsheet HS282
There is no capital gains tax charge when someone dies. The personal representatives take the assets at their market value on the date of death. gov.uk, HS282
Income tax, savings and dividend rates
Savings rates 20, 40 and 45% in 2026/27. Dividend rates 10.75, 35.75 and 39.35% from 6 April 2026. Savings rates of 22, 42 and 47% from 6 April 2027 (FA 2026 s.5), shown here only as a labelled option. gov.uk, rate changes
ITTOIA 2005 Part 4 Chapter 9, chargeable events
Gains on life policies are taxed only when a chargeable event happens: surrender, part surrender above the 5% allowance, assignment for value, maturity or the death that ends the policy (s.484). The individual who owns the policy and is UK resident in the year of the gain is liable (s.465). legislation.gov.uk, s.484
Inheritance tax, IHTA 1984
Nil-rate band £325,000, frozen to 5 April 2031. Rate 40%, or 36% where 10% or more of the net estate goes to charity (s.7 and Sch 1A). A policy held personally is in the estate like the portfolio would be. gov.uk, inheritance tax
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