You may have to pay Capital Gains Tax on shares that you dispose of and which have increased in value since their acquisition, in the same way as for any other kind of capital gains. Equally, capital losses on shares can be deducted from your taxable gains. The amount of actual Capital Gains Tax on shares that you may have to pay depends on your overall income. This is worked out by reducing your capital gains by £9,200 (the annual exemption amount) and adding the result to your taxable income, with the tax levied as per income tax as if the capital gains formed the top portion of the sum. There are also many exemptions that can help mitigate the effects of Capital Gains Tax.
Due to their nature, shares are subject to certain special rules and regulations when it comes to calculating capital gains:
- Tax advantages are offered on certain approved employee share schemes.
- There are exemptions on certain types of security and investment.
- Where more than one purchase or sale of a particular share is made on the same day, these are treated as a single acquisition or disposal.
- If you repurchase the same shares that you sold within the last 30 days, future capital gains are calculated on the shares at the value of your original purchase price, not the most recent purchase price.
- Shares are bought and sold under LIFO – ‘Last In First Out’ – which regulates the order in which they are identified for Capital Gains Tax on shares.
For more information and advice about Capital Gains Tax on shares, check out our online Fair Investment Tax Bookshop, stocked with useful tax guides and software including such titles as:
How to Avoid Tax on Your Stock Market Profits