Tax on shares income

[MrCippo]

Ok, so done a bit of reading on this and found out what CGT ( Capital Gain Tax ) and AEA ( Annual Exempt Amount ) are. How do and when do we really pay tax for our shares profits ? What's the good strategy here ?

[Eric Mc]

Buying shares is looked on as a Capital Investmnet. That means, when you eventually dispose of them, you may be liable to tax on the profit generated. Simple scenario -

1/5/2010 - buy 1000 chares say £1 each = £1,000

30/6/2015 - sell all those shares for £12,000

You have obviously main a profit (or, technically a capital gain) of £11,000

At the moment, an individual can have up to £10,100 worth of gains in a tax year before he is laible to CGT. In this case, this would leave £900 taxable.

The basic rate of CGT is now 18% but if any of the gain falls into the individual's Higher Rate Income levels, then that part of the gain will be taxed at 28%.

[mcflurry]

AFAIK dividends are taxed at standard rate, so higher rate payers need to declare and pay the difference

[Eric Mc]

mcflurry said:

AFAIK dividends are taxed at standard rate, so higher rate payers need to declare and pay the difference

Dividends are UNTAXED up to the point the recipient enters the Higher Rate Tax bracket. Once his/her income for the tax year exceeds (currently) £43,875, any dividend income will be taxed at 32.5%.