Buyback of Shares to Be Taxed as Capital Gains from FY 2026-27

Last updated: 06 February 2026

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From 1st April 2026, the way share buybacks are taxed in the UK is changing. Instead of being treated as dividend income, the money received will now be taxed as capital gains. This aims to simplify the process and address complexities in the current system. However, promoters will face higher effective tax rates, with individuals paying 30% and promoter companies paying 22%.

The taxation framework for buyback of shares is set to undergo a significant change from 1st April 2026, with the government proposing a shift from dividend-based taxation to capital gains taxation under the Income tax Act, 2025. The move aims to rationalise the existing structure and address concerns around differential tax outcomes, especially for promoters. Current Tax Treatment of Share Buybacks Under the existing provisions of the Income tax Act, 2025: Any consideration received by a

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FAQ :

The change will come into effect from 1st April 2026, applying from Tax Year 2026-27 onwards.

Currently, consideration received by a shareholder on buyback is treated as dividend income and taxed at applicable slab rates, while the cost of acquisition is recognised as a capital loss.

The consideration received on buyback of shares will be taxed under the head 'Capital Gains' instead of being treated as dividend income.

Yes, promoters will face a differential tax treatment. Individual promoters will have an effective tax rate of 30%, and promoter companies will have an effective tax liability of 22%.

The aim is to rationalise the existing tax structure, address concerns around differential tax outcomes, simplify tax laws, and reduce interpretational disputes.

For non-promoter shareholders, the move to capital gains taxation could result in a more logical and predictable tax outcome, particularly for long-term holdings.

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CCI News Desk

Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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