How much of my investments can I sell before I get taxed?
04 March 2021
Question by Jamie
Hi there, is there a limit of the amount of shares you can sell before I get taxed, is it £20,000 worth?
Answered by Darcy Needham
It depends on how the shares are held. If they are not held in an ISA or pension, yes, there is a limit on the amount of gain you can realise before you get taxed. Your gain is usually worked out by the taking the disposal proceeds of the shares and deducting what you paid for them. You get a Capital Gains Tax (CGT) allowance each year called the Annual Exempt Amount. For 2020/21, this means you can have gains of up to £12,300 before you pay any tax. You could also offset losses against your gains if you have previously sold shares at a loss. If the gains exceed your Annual Exempt Amount, you add the excess gains to your other taxable income for the year. If this amount is within the basic Income Tax band, you’ll pay 10% on your gains. You will pay 20% on any amount above the basic tax rate.
If the shares are held within an ISA or pension, you will not pay capital gains tax when the shares are sold. You may therefore want to consider setting up a stocks & shares ISA if you are likely to exceed your Annual Exempt Amount. You can currently contribute up to £20,000 per year.
Darcy started her career with Mazars in July 2013 when she joined the Mazars Financial Planning training scheme. She now focuses on delivering comprehensive and holistic financial planning advice to her clients. She has a firm belief that sound financial planning stems from having a suitable financial plan. This focuses not only on what clients currently have but, more importantly, what they want to achieve in the future.