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.