Shareholder

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 (£12,000 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.