Capital gains and dividend taxation (UK)
Capital gains and dividend taxation in the UK refers to the taxes individuals pay on profits from selling assets (capital gains) and on income received from company shares (dividends). Capital gains tax is charged when you sell assets like property or shares for more than you paid, with rates depending on your income. Dividend tax is applied to dividend income above a set allowance, with rates based on your overall taxable income band.
Capital gains and dividend taxation (UK)
Capital gains and dividend taxation in the UK refers to the taxes individuals pay on profits from selling assets (capital gains) and on income received from company shares (dividends). Capital gains tax is charged when you sell assets like property or shares for more than you paid, with rates depending on your income. Dividend tax is applied to dividend income above a set allowance, with rates based on your overall taxable income band.
💡 Key Takeaways
- Understand capital gains tax (CGT) in the UK and when it applies to selling assets like shares or property.
- Learn how CGT is calculated: sale price minus cost, with the annual exempt amount and allowable costs.
- Understand dividend taxation: the dividend allowance and how rates depend on your income tax band.
- Get practical tips for planning and reporting gains and dividends, including keeping records and using allowances and losses to offset gains.
❓ Frequently Asked Questions
What is capital gains tax and when does it apply in the UK?
Capital gains tax (CGT) is charged on the profit from selling assets such as shares or property (that isn’t exempt). You pay CGT if your total gains in the tax year exceed your annual exempt amount. The rate depends on the asset type and your income tax band.
How are capital gains taxed differently for shares vs property in the UK?
For most assets like shares, gains are taxed at 10% (basic rate) or 20% (higher/additional rate). For residential property, gains are taxed at 18% (basic rate) or 28% (higher/additional rate). You can also deduct eligible costs and the annual exempt amount.
What is dividend taxation and the dividend allowance?
Dividends are taxed as investment income. There is a dividend allowance that lets a portion of dividend income be tax-free each year; dividends above the allowance are taxed at rates that depend on your income tax band.
How can I reduce tax on capital gains and dividends?
Use the annual CGT allowance, offset gains with losses where possible, hold investments in tax-advantaged accounts (ISAs or pensions) to shelter gains and dividends, and consider transferring assets between spouses to maximise allowances.