How to Calculate Capital Gains Tax for Shares in the UK

Are you looking to understand how capital gains tax works for shares in the UK? Capital gains tax is an important consideration for people investing in stocks and shares, and understanding the basics can help you make the most of your investments. If you’re a shareholder in the UK, you may be liable for capital gains tax on any profits you make from selling your shares. To calculate your capital gains tax, you’ll need to first work out your ‘gain’. The good news is that there are a number of exemptions and reliefs available which could reduce or even eliminate your capital gains tax bill. This article will explain the basics of capital gains tax and how it applies to shares in the UK.

What is the rate of Capital Gains Tax on Sales of Shares?

In the United Kingdom, the capital gains tax on the sale of shares is generally 10% or 20%, depending on your tax bracket. If you are a basic rate taxpayer (which means you have an annual taxable income of up to £50,270), then your capital gains tax rate will be 10%. If you are a higher-rate taxpayer (which means you have an annual taxable income of more than £50,270), then your capital gains tax rate will be 20%. It’s a bit different for property, you can read our article to know further.

When do you need to pay the Tax?

In the United Kingdom, you generally need to pay capital gains tax on the sale or disposal of shares that have increased in value. This includes shares that you hold in a private company, as well as shares that you hold in a publicly traded company.

If you need to pay capital gains tax, you must report it on your self-assessment tax return. This is a form that you can use to report your income and capital gains for the tax year and calculate the amount of Tax you owe. You will need to complete a self-assessment tax return if you are self-employed, a company director, or if you receive income from sources other than your salary or pension.

It’s worth noting that there are a number of exemptions and allowances that you can use to reduce your capital gains tax liability. You can read more about it in our article.

Do I have to Pay Capital Gains tax when I gift the shares?

Suppose you are giving away something to someone you are not related to, like a friend, or selling it to them at a price lower than its market value. In that case, it will still be considered as a disposal at market value if the transaction is not done as a business exchange. The same applies to relatives, excluding your spouse/civil partner.

Calculate the total capital gain from all transactions during the accounting period.

Calculating the total capital gain from all transactions during an accounting period is an important step in determining the financial health of a business or individual. It is important to keep track of all income and expense transactions to properly calculate the total capital gains. 

To calculate your capital gains tax, you need to:

  1. Identify all of the shares, bonds and others you have sold or disposed of during the accounting period.
  2. Determine each asset’s sale price or market value at the time of the sale or disposal.
  3. Subtract the original purchase price or acquisition cost of each asset from its sale price or market value to determine the gain or loss on each asset.
  4. Add up the gains or losses on each asset to determine your overall gain or loss for the accounting period.
  5. If you have made a gain. Subtract any exemptions or allowances you are eligible for (such as the annual exemption or the private residence relief) to determine your net capital gain.
  6. Calculate the capital gains tax you owe on your net capital gain by applying the appropriate tax rate (10% or 20%, depending on your tax bracket) to your net capital gain.

Submit your tax return with the results of your CGT calculations.

Use the self-assessment tax return form to report your capital gains and other income for the tax year. Calculate your capital gains tax liability by adding your net capital gains and applying the appropriate tax rate (10% or 20%, depending on your tax bracket).

Submit your self-assessment tax return online or by post, along with any supporting documentation, by the deadline specified by HMRC.

Stop worrying about filing your taxes, and let the experts at TaxTotal take care of it for you! With our online self-assessment return filing, you can quickly and easily get your taxes filed and avoid the hassle. Get started now!

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