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CGT on shares and Investments

Tax Planning

Capital Gains tax on shares and investments. You will either make a profit or a loss when you sell shares. Profits made are classed as a capital gain.

There are some exemptions where capital gains tax (CGT) is not liable:

  • Individual savings accounts (Isa’s)
  • Venture Capital Trusts
  • Enterprise Investment schemes
  • Gifts to Charity
  • Government Securities
  • Corporate Bonds of a qualifying status
  • Transfers of shares between spouses or partners in a civil partnership
  • betting, lottery or pools winnings

Apart from the exemptions, sales or disposals of the shares will generally be classed as potential capital gains.

Each person has an allowance each year they can use to reduce the amount of CGT they might pay. If your total gains for the tax year are below the “annual exempt allowance”, you will not have to pay any tax.

If your gains are over the allowance, tax would be due on the balance. It might also be possible to offset any losses from previous tax years. If you do not use your annual exempt allowance for CGT in a tax year, then you lose it, and you cannot carry it forward to another year. The CGT tax rate payable will depend on your total income and any gains made for the tax year in question.

The government changed the way Capital Gains were taxed in April 2015. The amount of tax due will depend on whether you are a basic or higher-rate taxpayer.

Basic Rate Taxpayers

If you are a basic rate taxpayer, if the gain minus any allowance is added to your income, then the tax rate is 10% or (18% if the gain is concerning residential property). For gains over the basic rate income tax band, you will pay 20% tax and 28% for residential property over the basic rate tax band.

Higher Rate Taxpayers

Gains are higher rate taxpayers are 20% and 28% for residential property.

Reporting Gains

Any gains you make must be reported to HMRC via your self-assessment tax return. If you do not complete a self-assessment return, you must advise HMRC of the gain and request a return. It is, therefore, important that you keep any relevant paperwork from the purchase and sale of an asset to work out how much tax is due accurately.

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