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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.

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