A shareholder is someone who owns shares in a limited company.
You’re a shareholder if:
- you started your own private limited company (“Ltd”) – in this case, you’re also a company director
- you received shares in your employer’s company
- or you bought shares of a public limited company (“Plc”) – for example, through a trading app like Freetrade or eToro.
When you’re not a shareholder:
- if you’re self-employed – even if HMRC classifies freelancers as “sole trader businesses”. In that case, you and your business are one. A limited company is a completely separate business.
- if you’re in a business partnership. Partnerships are basically a way for self-employed people to work together. You’ll need to file a Self Assessment tax return both for yourself and the partnership, but you won’t have separate debts and assets.
What being a shareholder means for your taxes:
- if you sell shares for a profit, you need to pay Capital Gains Tax (CGT) – but only if the profit is above the CGT allowance (£12,300 in the 2018/19 tax year)
- if you sell shares from an ISA account, those profits are always tax-free
- sometimes profits from selling your employer’s shares are also tax-free
- if you made a loss selling shares, you can “carry forward” that loss to the next year and claim it then. This way you can reduce your CGT next year
- if you receive dividends from your shares, and these dividends are bigger than the Dividend Allowance (£2,000 currently), you also need to pay dividend tax on them.
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