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Shares are pieces of a limited company. If you own shares you’re technically called a “shareholder”.

You can get shares in many ways:

  • by starting your own limited company
  • by receiving shares in the company that you work for – as a bonus or as an incentive
  • or by buying them, usually through a broker or investment app.

Shares are also sometimes called “stocks”.

What owning shares means for your tax situation:

  • if you earn dividends from your shares, and if those dividends are over £2,000 (the dividend allowance this year), you need to pay dividend tax on them (either through your tax code or through a Self Assessment tax return)
  • if you made profits from selling shares, and if those profits were over the Capital Gains Tax Allowance (£12,300), you need to file a tax return and pay Capital Gains Tax on this profit
  • if you received shares in the company you work for, you might need to pay Income Tax and National Insurance – unless your employer applied for a special company share options scheme like CSOP or EMI
  • but any earnings from shares held in a Stocks & Shares ISA are completely tax-free
  • same for earnings from shares that your private pension invests in
  • finally, if you invested in shares of EIS or SEIS startups (for example, through websites like Crowdcube or Seedrs), you can file a tax return and claim Income Tax relief (either 30% or 50%).

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