How Capital Gain Tax works on share investments held for multiple years?

Hello everyone,

Iā€™m Andrea and this is my first post on the forum. Itā€™s been some time Iā€™ve got a question in mind, how Capital Gain Tax works on share investments held for multiple years? I mean I have a General investment Account on Freetrade ( so not ISA), opened in April 2020. I bought some shares but if I hold them like until 2025, how would CGT be calculated seeing that Iā€™ll be holding my shares longer than 1 tax year?

Many Thanks

Hey! I am not aware of any special holding period rules for shares bought through a broker like freetrade. So you just pay whatever rate applies on the profit of that transactions, for everything above the Ā£12 300 allowance in the tax year that you sell them in.

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Yeah itā€™s done yearly, you technically havenā€™t made any capital gains until you sell the positions, then that would apply to the CGT allowance for that particular year. At least thatā€™s my understanding of it.

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Many thanks for your answers.

So recapping, if i buy shares this year and i sell them in 2025, going over the allowance that there will be in 2025, i will pay taxes only based on the rates and percentages of the 2025 year. So no cumulative taxes that increase year by year till 2025 ecc

Something like this should give you a ball park figure:

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Yes.

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ok, got it. Thank you very much to all of you for the explanation : )

I was trying to work out how much you would pay as a small investor if you sold. I keep reading if you held them for less than a year you pay 100 percent on it but if over a year you get taxed on 50% of the profit.

I tried the gov website calculator and it doesnā€™t seem to ask if you have held them for over a year or not?

I also donā€™t understand their calculation as well.

Can someone correct me so say for example I earned 20k a year before tax I bought shares worth Ā£100 then sold for Ā£500 after a year Ā£200 would be taxed at due to the 50% and would this be added to my 20k a year to make Ā£20,200 then Ā£12,570 tax free Allowence leaving Ā£7,630 taxable?

Sorry first time looking at this I keep seeing 10% itā€™s taxed at or different rates so Iā€™m not sure if itā€™s grouped as one or taxed separate?

Any help would be grand thanks.

@Kiava You have a UK capital gains tax (CGT) allowance of Ā£12,300 this year.

So you would pay no CGT on a gain of Ā£200. This gain would not be added to or subtracted from your income. How long you have held them, 1 day or 300 days, has no bearing on the calculation. All that is relevant is the difference between how much you sold them for and how much you bought them for**.

I am not sure what you are looking at. Here is the official documentation

** strictly speaking it is different if you bought them before April 1982. Which I assume is not the case here :slight_smile:

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Ahh thank you both for the great responces. When I kept seeing that Ā£12,300 I thought they were maybe delayed on the Ā£12,570 tax free Allowence I never new there were two separate Allowences if so thatā€™s sweet.

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Also on that holding for a year or less than a year etc I think I may have been looking at another country Iā€™m not sure :smiley:

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With GIA accounts I hear some choose to sell under the Ā£12,300 each year to then pay into their ISA. This is the ā€˜mostly correctā€™ strategy for GIAā€™s? Hugely depending on personal circumstances.

I think this seems to be the way ā€¦ Though Iā€™d tread with caution as we donā€™t know what thresholds the Gov will or wonā€™t cut in the futureā€¦ They will have to pay for the pandemic somehow.

Complicated topic. And definitely widely misunderstood. Gets even more complicated when you realise that most of the government debt is to itself. Let me put it this way ā€¦ who exactly does the government owe money too? Hint: Government budgets are not like household budgets (in spite of what some governments might try to claim or imply)

I donā€™t know the answer ā€¦ but I do know that the Government were way to quick to offer business support to ā€˜everybodyā€™ regardless of their needs.

People getting 25k ā€¦ Albeit ā€¦ taxable ā€¦hand outs when their businesses were thriving during the early days of the pandemic is just crazy.

What I do know is, that the money will be recoupedā€¦ No matter where it comes from, or who itā€™s owed too ā€¦ Do we print money? Probablyā€¦

tbh, I donā€™t want to get into politics here. The point I want us to reflect on is about simple economics and specifically to money supply. IMO when we understand this topic we may begin to better understand how and why our own shares are going in the direction they are going (at least sometimes :slight_smile:). It is no coincidence that there was a post pandemic** surge in share prices.

** yes, strange term ā€œpost pandemicā€ when we are quite clearly still in the middle of it ā€¦

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