Shares

Shares are pieces of a limited company. If you own them, you’re technically called a “shareholder”. Shareholders are entitled to dividends, a portion of the company’s annual profits.

You can get shares in many ways like:

  • Starting your own limited company
  • Receiving shares in the company that you work for – as a bonus or as an incentive
  • Buying them, usually through a broker or investment app

They are also sometimes called “stocks”.

What owning shares means for your tax situation:

  • If you earn dividends from your shares, and if those dividends are over £1,000 (the dividend allowance this year), you need to pay dividend tax on them (either through your tax code or through a Self Assessment tax return)
  • If you made profits from selling shares, and if those profits were over the Capital Gains Tax Allowance (£3,000), you need to file a tax return and pay Capital Gains Tax on this profit
  • If you received shares in the company you work for, you might need to pay Income Tax and National Insurance – unless your employer applied for a special company share options scheme like CSOP or EMI
  • Any earnings from shares held in a Stocks & Shares ISA are completely tax-free
  • The same goes for earnings from shares that your private pension invests in
  • Finally, if you invested in shares of EIS or SEIS startups, you can file a tax return and claim Income Tax relief (either 30% or 50%)

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