When it comes to Capital Gains Tax, shares fall under some special conditions. This is because, unlike most capital assets, shares are not uniquely identifiable and thus require their own rules for handling the tax.
Capital Gains Tax shares calculations need to keep the following in mind:
- Shares are bought and sold under a ‘Last In First Out’ (LIFO) system, which sets up a specific order in which shares are identified for the purposes of Capital Gains Tax.
- Tax advantages and exemptions are available on certain government-approved securities and shares, such as employee share schemes.
- While it may not affect many investors, if you make more than one purchase of a particular share in a single day then these purchases are treated as a single acquisition for the purposes of Capital Gains Tax, and the same applies to sales of a particular share.
- The 30 day rule means that if you repurchase shares that you sold in the last 30 days, you are treated as owning them from the original purchase of the shares that you made initially, and Capital Gains Tax will be calculated on the change in their worth since that initial purchase, not the latest one.
- Taper relief can reduce the payable tax on shares depending on how long you have owned them for.
- Transfers of shares to your spouse, civil partner or children are not subject to Capital Gains Tax, but should they dispose of the shares in the future then they may be subject to the tax, based on the shares original cost to you.
- The first £9,200 of capital gains each year is exempt from tax.
For more advice and information on Capital Gains Tax and shares, check out the links below and our online Fair Investment Tax Bookshop, featuring useful software and guides such as:
How to Avoid Tax on Your Stock Market Profits