Income from shares

huxy1

Is the sale of any shares classed as income?

bowlhead99

huxy1 wrote: »

Is the sale of any shares classed as income?

No, it's the proceeds of selling assets. If you sold them for more than you paid for them (or more than they're worth when you were given them as an inheritance or other gift), you have made a capital gain, which can be subject to capital gains taxes rather than income taxes.

Exceptionally, you may be operating a self-employed business whose business is to trade shares, so that the profits on buying and selling the shares within your business is subject to income tax. But this is extremely rare.

talexuser

Selling shares is not classed as income, it is classed as capital gains.

If the gain (difference between buying and selling the shares) is more than £12000, then the amount above 12k is liable to capital gains tax in any tax year (you have another 12k allowance the following tax year, so big gains can be split between years). Assuming you are already a taxpayer and used up your personal tax allowance.

Tom99

talexuser wrote: »

Selling shares is not classed as income, it is classed as capital gains.

If the gain (difference between buying and selling the shares) is more than £12000, then the amount above 12k is liable to capital gains tax in any tax year (you have another 12k allowance the following tax year, so big gains can be split between years). Assuming you are already a taxpayer and used up your personal tax allowance.

I don't think you can offset a capital gain against your personal allowance.

bigadaj

Tom99 wrote: »

I don't think you can offset a capital gain against your personal allowance.

No, but the rate at which are taxed depends on your income. So presumably if you haven't earnt above your personal allowance in that tax year then any capital gains will be taxed at zero up to the personal allowance limit.

Tom99

bigadaj wrote: »

No, but the rate at which are taxed depends on your income. So presumably if you haven't earnt above your personal allowance in that tax year then any capital gains will be taxed at zero up to the personal allowance limit.

I don't think so. You get the £12,000 CGT allowance and above that pay tax at 10% even if you have no other income.

ColdIron

bigadaj wrote: »

No, but the rate at which are taxed depends on your income. So presumably if you haven't earnt above your personal allowance in that tax year then any capital gains will be taxed at zero up to the personal allowance limit.

Unused personal allowances cannot be set against capital gains. They are septate regimes

talexuser

On reflection, probably so, but seems harsh. Since the ctg and personal allowance are only £500 apart, perhaps that is the idea.

Heedtheadvice

Bowlhead has it.....some of the other posts just confuse things!


To add:
Disposal of assets in any financial year are agregated. The assets can be a shares in one or more companies as well as other assets. Some personal assets are excluded.

If the result is a gain then you might have to pay capital gains tax if the gain is over the limit. The gain is sale proceeds minus purchase cost minus any costs of purchase and sale.


If the result is a loss then you can elect on your tax return to carry the loss forward to following tax years to offset any gains made in those future years. Useful if in those future years you are subject to paying the capital gains tax.


It becomes more complicated if you sell a holding or part of a holding of shares accumulated by way of more than one 'purchase'.


Tax is not payable if the assets/shares are held within a tax efficient wrapper such as an ISA.



If the assets are held as part of a business then other rules apply.


All rather simplistically put!

bigadaj

Tom99 wrote: »

I don't think so. You get the £12,000 CGT allowance and above that pay tax at 10% even if you have no other income.

Fair enough, hadn't looked into this as it must be an unusual situation. There's obviously am interaction with income in terms of the rate at which cgt is paid is partially dependent on that but obviously a minimum 10%.

jimjames

huxy1 wrote: »

Is the sale of any shares classed as income?

And to confuse things further, based on the use of the word ANY, not all shares sales are classed as capital gains either. If you hold the shares inside an ISA then all gains and income are completely free of tax with no limit other than the annual contribution allowance to put money inside.

So if your shares do well then it's possible to have over £1m that is free of CGT and income tax on any dividends so an ISA can be extremely valuable.