July 29, 2014

Capital Gains Tax on Shares explained

Capital Gains Tax on shares refers to the profits that you make on the selling of any shares. If you have made a profit on shares sold within the tax year (gains – losses), then you may be liable to Capital Gains Tax.

You will be liable to Capital Gains Tax, depending on whether your profit exceeds the annual capital gains tax allowance of £10,600 (for 2011 / 2012).

From June 23rd onwards, the tax rate will vary between 18 percent and 28 percent dependant on your taxable income:

  • Your shares will be subject to an 18 percent Capital Gains Tax Rate when added to a taxable income of £42,475 or lower
  • Your shares will be subject to an 18 percent Capital Gains Tax Rate when added to taxable income of over £42,475, starting with £42,476 or higher

Some investors will look to use their yearly Stocks and Shares ISA allowance in order to avoid paying Capital Gains Tax on shares due to the tax-free nature of the investment wrapper.