Shares are pieces of a limited company. If you own them, you’re technically called a “shareholder”.
You can get shares in many ways like:
- Starting your own limited company
- Receiving shares in the company that you work for – as a bonus or as an incentive
- Buying them, usually through a broker or investment app
They 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 £1,000 (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 (£3,000), 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
- Any earnings from shares held in a Stocks & Shares ISA are completely tax-free
- The same goes 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%)