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To understand securities if you’re not familiar with the world of investing, it’s easiest to look back on how they began. Back in the day when investments were paper-based, a security was the documentation (or certificate) that you were given as a receipt. They outlined the terms of the investment and were used as proof of the investment too. 

Today, investments don’t come with paper receipts. So securities are the term for any financial instrument that you can trade on the financial market. Examples of some are:

  • Shares in a company
  • Bonds (also known as a debt security)
  • CFDs (contracts for difference), futures, options, etc. (sometimes called “derivatives”)

How are you taxed on securities?

You’re taxed on the profits that you make from trading securities. How you’re taxed depends on a few things:

  • Are you a full-time trader? You might owe Income Tax
  • Do you trade on the side? You could be liable for CGT
  • How much have you made from trading?

HMRC consider securities to be assets. This means that if you sell them for a profit, you might be liable to pay Capital Gains Tax. The Capital Gains Tax allowance in the 2021/22 tax year is £12,300 – which means that you can earn up to £12,300 profit from trading securities tax-free. 

After this, you owe tax at the following rates:

Type of asset Basic rate Higher rate
Shares 10% 20%
Residential property 18% 28%
Bitcoin/Cryptocurrency 10% 20%
Other 10% 20%

You pay tax from selling securities held in an ISA account, in which case gains from ISAs are always tax-free.

How do you pay?

To pay Capital Gains Tax, you’ll need to submit a Self Assessment Tax return. You do this by 31st January after the tax year you’re paying for. 

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