Equity is the how much all the shares of a limited company are worth. In simpler terms, when you buy shares in a limited company, you are buying equity in that company.
If you earn money from owning equity, you might need to pay tax:
- if the companies you own equity in pay you dividends over £2,000, you might need to pay dividend tax
- if you make profits from selling shares, and those profits are over the Capital Gains allowance (£12,000 in 2019/2020), you need to pay Capital Gains Tax (CGT) on them
- you also need to pay CGT when you sell shares that you received as part of an employee incentive scheme (for example, EMI).
- profits from selling shares of EIS/SEIS startups are tax-free
- you can also claim Income Tax relief when you invest in EIS/SEIS startups
- finally, you don’t need to declare or pay tax on any profits or dividends from shares held in a Stocks & Shares ISA.