What do I need to know for tax purposes?

Capital Gains Tax‍

When you sell your investments, this will be a disposal for Capital Gains Tax purposes and, if a gain arises, you may be liable to CGT. For 2024/2025, you have a Capital Gains Tax allowance of £3,000. This means if your total realised gains are within this allowance, you do not have to pay CGT.

If you’ve had to realise a loss, you can use this loss to offset realised gains in the same tax-year, or in future for up to four years.

You can find more information about this on the UK Government website at gov.uk/capital-gains-tax/

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Dividend Tax‍

A dividend is a reward paid to shareholders for their investment in the company (note, not all companies pay dividends, and just because one has in the past, doesn’t mean it will in future). 

You do not pay tax on any dividend income that falls within your Personal Allowance (the amount of income you can earn each year without paying tax). You also get a dividend allowance (£500 for 2024/2025 tax year) and only pay tax on any dividend income above the dividend allowance.

You can find more information about this on the UK Government website at https://www.gov.uk/tax-on-dividends 

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Key Takeaways:

• You only have to pay Capital Gains Tax on your total gains above your annual tax-free allowance (£3,000 for 2024/25)
• You can report your realised losses up to 4 years after the end of the tax year that you disposed of the asset, to reduce your tax liability in future
• You do not need to tell HMRC if your dividends are within the dividend allowance for the tax year (£500 for 2024/25)

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When investing, your capital is at risk. Remember, tax treatment depends on your individual circumstances and may be subject to change.

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