If you make total 'gains' (profits) above a certain level when you dispose of assets, including shares, you may have to pay Capital Gains Tax. Special rules apply for identifying shares acquired in the same company at different times - to ensure you work out the correct gain or loss.
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Whether or not you need to pay Capital Gains Tax when you dispose of shares depends on your total gains for the tax year. This includes the gain on the shares and gains on the disposal of any other assets that attract Capital Gains Tax.
Capital Gains Tax is charged on total gains after:
This depends on your overall income.
To find out how to calculate Capital Gains Tax and check which other assets attract Capital Gains Tax read the related article by following the link below.
Shares differ from most other assets that attract Capital Gains Tax because they're not uniquely identifiable. You may buy shares of the same class in one company at different times and at different prices. As a result you have to apply special rules when working out their acquisition cost for Capital Gains Tax purposes.
Special Capital Gains Tax rules apply to shares bought or acquired through an employee share scheme or as a result of your employment. HM Revenue & Customs (HMRC) approved schemes, such as Share Incentive Plans, approved Save As You Earn schemes, Company Share Option Plans and Enterprise Management Incentives offer tax advantages. If you receive shares from your employer and become an employee shareholder there are also tax advantages and special Capital Gains Tax rules. If you follow the rules, you may pay less or no Capital Gains Tax when you sell the shares.
You must fill in the Capital Gains Tax pages of your return if any of the following apply:
If you do not tell HMRC in time about gains that should be included on your tax return you may have to pay a penalty.
You can find out more about the forms you'll need and how to file your tax return online or on paper by following the link below.
If you have worked out that you do have Capital Gains Tax to pay, you need to report this to HMRC by sending a tax return. You must register for Self Assessment before you can do this. The latest you can register is by 5 October after the end of the tax year for which you need a tax return. You may have to pay a penalty if you do not tell HMRC in time that you have Capital Gains Tax to pay.
If you give shares away - so you get nothing for them - your gain is based on what they're worth. It is the same if you choose to sell them for less than their full value. So you need to work out the gain based on the full value of the shares when you gave them away.
If you sell or give the shares to a 'connected person', such as a close relative or a company you control your gain is based on what they're worth - which is the full value of the shares when you sold or gave them away. But see the next section if the person you're connected to is a husband, wife or civil partner and follow the link below for more on 'connected persons'.
You don't have to pay Capital Gains Tax if you sell or give shares to your husband, wife or civil partner while you're legally married or in a civil partnership and living together. But if they later sell or give away the shares, they may have to pay Capital Gains Tax on the gain - based on their original cost to you.
There's no special relief if you sell or give shares to your children.