newbie question on tax on shares

xyz123

hi

looking to buy some shares through an on line broker. Question is what tax do i pay on any profits that i may make when i sell the shares?

do i simply add it to that year's income or any profit from shares is only considered under the capital gains tax. in that case i think £10,000 per year is tax free under capital gains as per current rules. and also in that case stocks and shares isa are not worth it for small investors as most brokers will charge a maintenance fee which may not be worth the tax savings on dividend!

ta

CLAPTON

for capital gains, you have a cgt allowance of 10,600 per year
then you pay 18% or 28% depending upon your other income


dividends are 'tax free' for standard rate payers
for 40% tax payers you pay 25% of the dividend received

nomunnofun

xyz123 wrote: »

hi

looking to buy some shares through an on line broker. Question is what tax do i pay on any profits that i may make when i sell the shares?

do i simply add it to that year's income or any profit from shares is only considered under the capital gains tax. in that case i think £10,000 per year is tax free under capital gains as per current rules. and also in that case stocks and shares isa are not worth it for small investors as most brokers will charge a maintenance fee which may not be worth the tax savings on dividend!

ta

Possibly - but do not forget that all gains, regardless of the amount, made on shareholdings within an ISA are also free from Capital Gains tax and do not affect your annual tax free exemption. This could be significantly more beneficial!

xyz123

CLAPTON wrote: »

for capital gains, you have a cgt allowance of 10,600 per year
then you pay 18% or 28% depending upon your other income


dividends are 'tax free' for standard rate payers
for 40% tax payers you pay 25% of the dividend received

Thanks.do i need to pay any "income tax" on any profits from share sale?

CLAPTON

xyz123 wrote: »

Thanks.do i need to pay any "income tax" on any profits from share sale?

you have an allowance of 10,600 (i.e. tax free) then you pay 18% or 28% of the profit over that amount depending upon what your earned income is

so if you were a 40% tax payer you would pay 28% on all the excess

if your earnings plus the 'excess' profit kept you below 42,475 then you would pay 18% on the excess
if between, then some at 18% and some at 28%

chrismac1

I have been investing in shares since 1997. In 2012 the gain on my portfolio was over £20k and it is over £10k in 2013, albeit the market is due a pullback of 4% or so which would be a decent buying opportunity.

I have NEVER paid any Capital Gains Tax and it is highly unlikely that I ever will.

About 50% of my shares are directly invested, the rest is in a SIPP and an ISA package so no tax to worry about there.

When you come to sell shares - I recently sold £20k of Synergy, for example - you just need to be aware of CGT. It is the NET gain in a given tax year that count against the annual exemption - NET of any losses brought forward and losses arising in the given tax year.

CGT is largely a voluntary tax on shares.

xyz123

CLAPTON wrote: »

you have an allowance of 10,600 (i.e. tax free) then you pay 18% or 28% of the profit over that amount depending upon what your earned income is

so if you were a 40% tax payer you would pay 28% on all the excess

if your earnings plus the 'excess' profit kept you below 42,475 then you would pay 18% on the excess
if between, then some at 18% and some at 28%

sorry am still confused. Is the allowance 10,,600 entirely available to share sale profits?

for example if i pay 40% tax on my income, and in addition i make £5000 profit from share of sales. do i pay any tax on the £5000 profit (ignoring any dividends)? am i correct thinking that as £5000 is less than 10,600, i dont need to pay any tax on that £5000.

sorry for asking again. ta

CLAPTON

you have a cgt allowance of 10,600 (i.e. tax free)

so if your capital gains profit is less than 10,600 then you pay no cgt

if your profit is more than 10,600 then you pay tax on the amount over 10,600
so if you made 11,000 profit on capital gains then you pay tax on 400

xyz123

CLAPTON wrote: »

so if your capital gains profit is less than 10,600 then you pay no cgt

i am really sorry to ask this again. i understand that if profit is less than 10,600 then i pay no CGT. But do i pay any other tax e.g. an "income tax" on the profits or are share profits only subject to CGT and no other type of "income tax". i hope i am making my question clear.

thanks a lot

CLAPTON

xyz123 wrote: »

i am really sorry to ask this again. i understand that if profit is less than 10,600 then i pay no CGT. But do i pay any other tax e.g. an "income tax" on the profits or are share profits only subject to CGT and no other type of "income tax". i hope i am making my question clear.

thanks a lot

No, you pay no other tax on capital gains.

xyz123

CLAPTON wrote: »

No, you pay no other tax on capital gains.

thanks a lot.