Paying tax on share gains

Charzhin0

It's a simple question that I cannot find a straightforward answer to on the gov.uk site.
Question is, how much tax do you have to pay on the money you gain from profiting off shares. I am confused whether your personal allowance is applied to captial gains tax and income tax seperatley, or whether it falls under the same umbrella.

Example scenario: In 1 tax year I gain a profit of £10,000 from selling shares. I have a basic salary of £32,500. The personal allowance on income tax is £12,500 so my taxable income is £20,000. Do I have to pay any capital gains tax on the £10k of share sales? Or do I add it to my taxable income, making it a ''total income'' of £30k thus I pay tax on this total income which would be in the basic tax bracket.


Thank you

eskbanker

Income tax is applied to income from earnings (salary/wages, pensions, benefits, etc), savings interest and dividends.

Capital gains tax is relevant to capital gains crystallised when selling assets such as shares.

In your example you don't add everything up to make a notional 'total income' as the share sale isn't treated as income for tax purposes, so the personal tax allowance is applied to your £32.5K salary and the CGT allowance is applied to the £10K share gain (so no CGT to pay as this is below the threshold).

ElephantBoy57

Charzhin0 said:
Question is, how much tax do you have to pay on the money you gain from profiting off shares.

Does anyone in authority check these things? I owned a few shares and never paid any tax.

Isn't that what an ISA is for, to avoid tax?

Trump didnt pay any tax, maybe its different in the USA?

[Deleted User]

ElephantBoy57 said:

Charzhin0 said:
Question is, how much tax do you have to pay on the money you gain from profiting off shares.

Does anyone in authority check these things? I owned a few shares and never paid any tax.

Isn't that what an ISA is for, to avoid tax?

Trump didnt pay any tax, maybe its different in the USA?

Hi,

were the shares in an ISA, or did the gain on your 'few shares' not exceed the CGT threshold?

Albermarle

Isn't that what an ISA is for, to avoid tax?

Yes but there is a limit how much you can add to an ISA each year of £20K .

If you were a large investor , had a large inheritance  or just wanting to get the 25% tax free out of your pension and re invested , you have to invest outside of an ISA as well .

steampowered

Income tax and capital gains tax are separate and have separate annual allowances.

No income tax or capital gains tax is payable by UK residents in relation to shares held within an ISA.

Other countries (e.g. the United States) do not recognise ISAs, so profit made within an ISA will be taxable if you are tax resident overseas.

Charzhin0

eskbanker said:

Income tax is applied to income from earnings (salary/wages, pensions, benefits, etc), savings interest and dividends.

Capital gains tax is relevant to capital gains crystallised when selling assets such as shares.

In your example you don't add everything up to make a notional 'total income' as the share sale isn't treated as income for tax purposes, so the personal tax allowance is applied to your £32.5K salary and the CGT allowance is applied to the £10K share gain (so no CGT to pay as this is below the threshold).

Thanks. The gov website should have your first 2 sentences, you explained it very succintly without confusion.

ElephantBoy57

[Deleted User] said:

Hi,

were the shares in an ISA, or did the gain on your 'few shares' not exceed the CGT threshold?

It's probably around 5 years since I bought any shares with the certificate, I didn't have that many, never more than £5,000 worth.