Hey guys, it's sasha in this video i'll, explain everything you need to know about tax on investing. If you live in the uk, there is quite a lot to get through and i'm gon na do it as quickly as possible. Make sure you listen to the whole thing, though, because there'll be some parts that maybe you won't be aware of that are really important and make sure you check the timestamps in the description. If you want to re-watch any specific part, just a really brief disclaimer.

I am not a financial or a tax advisor and i can't provide any of that kind of advice here. I am just providing educational informational stuff here and if you do need specific financial tax advice, make sure you go and seek the help of a suitably qualified professional. Now that that's out the way - let's first start with talking about isis, there are two major types of tax that apply when you invest your money, they're called capital gains and dividend tax, and on some rare occasions some other taxes apply as well, and i'm gon na Talk about them in just a second, but before i do, there is a way that most people in uk can avoid paying both of those big taxes through investing in a stocks and shares isa account. Now.

This is a specific type of iso. Account allows you to invest your money rather than just save it, and you can go and put up to 20 000 pounds per year in it. Just remember that that applies across all your different ices as a total allowance. If you do go and use one of those stocks and shares ice accounts, you can then go invest in shares.

Etfs funds and you'll be able to earn money through gains in the value of your investments or through dividends, without having to pay any tax at all. Having said that, you can't avoid all taxes and stocks and shares isa. For example, if you invest in u.s companies, you will still have to pay 15 percent dividend withholding tax to the us government, for example, and if you buy uk shares in some companies, you will also have to pay stamp duty, which i'm going to explain in just A second but the big ticket items that you won't have to pay any tax on at all. So if you don't use a 20 000 pound annual isa allowance for any other purpose, this is a really good way of making sure that you won't have to be paying the tax man anything, no matter how much your portfolio grows.

Now, if you want to invest in a stocks and shares iso account, you can go and get yourself a free share worth up to 200 pounds by just signing up to free trade. Using my link in the description below just remember, it will cost you three pounds. A month for the isa, although the general investment account, is free, unfortunately, trading, one two who offer a free one that i also use and like i do not accept customers right now, although that might change in the future. So if you want to go and try them out if you're watching this video in a few days time, hopefully make sure you go and check that link out as well, they also do a free share.

Now, let's talk about capital gains tax. If you invest, you will have to pay capital gains if your shares grow in value, but there are important caveats. First, there is an annual, not percent tax band for capital gains as it stands right now. As per the recent budget announcement, it will be 12 300 pounds all the way to april 2022, and it may change afterwards so make sure you go and check.

This means that if you earn gains up to that amount, you will not have to pay anything in capital gains tax, no matter how much you earn through any other sources. You'll pay, nothing on capital gains, capital gains is only due. This is really important when you dispose of your assets. So that means, if you go and set buy, say 10 000 pounds worth of shares in the company and they grow to a total value of one hundred thousand pounds.

You will not have to pay capital gains tax on that ninety thousand growth. Unless you sell the shares, if you only sell twelve thousand pounds out of that one hundred thousand pound total, for example, you won't have to pay any tax, because your gain is going to be just 10 800 pounds which is below the 12 300 pound annual allowance. If that's a little bit confusing and you're, not quite sure how i got to that number, don't worry i'm going to be making a video very shortly, while i explain exactly how the calculation for capital gains tax works and, if you're watching this in a few days Time, i'm going to put a link in the description below so make sure you go and check that out. If you are interested to understand exactly how to do the actual maths now, if you happen to earn more than the 12 300 pound allowance, there are two different tax rates that apply depending on how much you earn.

If you are a basic rate, uk taxpayer, you will have to pay 10, which is not too bad actually and considerably less than you would pay in income taxes. If you include national insurance, if you're a higher or additional rate taxpayer so you're earning over 50 000 pounds, you'll have to pay a rate of 20 percent. Remember that if you earn just under 50 000 pounds on your normal salary, for example, then if you have capital gains that take you over the 50 000 threshold, then any amount over the threshold will be taxed at the 20 rate. Just something important to remember one other thing to remember is that you are allowed to deduct fees and stand due to when you calculate your gains.

This is something that people often forget. So if your broker, for example, charges you transaction fees for the privilege being to buy and sell the shares, you are allowed to go and take that out of your capital gains and that's just a little way that you can go and reduce the amount of tax Burden one other really important thing to understand is that with capital gains there's this concept called bed and breakfasting. It means that if you sell your shares, for example, in a company and then buy them back within 30 days, then as far as hmrc is concerned, you never sold the shares in the first place. This exists so that you can't go on the first.

On the 5th of april and sell, say, 12 300 pounds worth of shares and then immediately after on the morning of the six, when the new financial year starts, go and buy them all back again. Therefore, sort of crystallizing the gain and therefore not having to pay tax on the 12 300 pounds. If that makes any sense, however, it also plays to your advantage, because if you go and sell some shares and within the next month, go and buy them back for whatever reason. Let's say you sold them as the price was going down and then buy back at the bottom.

It means you won't have to pay capital gains at the point when you originally sold them, because you can go and wait until you finally actually sell them at some point in the future before that gain is materialized. Next, let's talk about dividend tax. You will have to pay dividend tax on any dividends you receive, and this is taxed differently to both income and capital gains. Remember that if your investments are sitting inside an isa, then you will not have to pay any dividend tax other than the us withholding tax.

The u.s government automatically deducts before the the dividends ever actually get to you. However, if you get dividends outside the nicer here is what you need to know. There is a zero percent tax ban for dividends and it's set at 2 000 pounds per year. At the moment, it used to be higher, but it's quite low uh, but remember that dividends earned this way for investing are exactly the same as dividends earned in any other way.

For example, if you're a small business owner and you pay selling dividends or if you have shares in your company that you work for, if you earn dividends of any other kind, that two thousand pound allowance is the same across all of those. So just beware in case you're already using it now for dividends above two thousand pounds. There are different tax rates again that are charged and they are again based on how much you actually earn so for basic rate tax payers. It's just 7.5 percent on dividends, which is not bad, which is probably why a lot of small business owners go and use this for higher rate taxpayers.

It is 32.5 percent and for additional rate people who earn quite a lot of money. It is 38.1, so dividends cost less than tax than income, but you do have to pay quite a bit if you earn over 50 000 pounds. So, just something that you need to be aware of one other tax that you may not really know much about is stamp duty and there are different kinds of stamp duty that apply. For example, when you're buying houses - or things like there is a specific type of stamp duty that applies to buying uk based shares.

Now it's important. This applies to most companies, most of the big companies that you'll be investing, but not all, especially some of the small companies and it's based on how the shares of that company are traded. So, for example, there is a london stock exchange aim market for smaller companies that don't make it to the big ftse listing and those companies many of them. You won't have to pay that term duty on because of the way that the transactions process and the systems that are used do.

Remember, though, that if you're buying into an etf that is based abroad, but trades in london stock exchange, you won't have to pay stamp duty and that's the majority of all the big etfs out there, because they're typically going to be domiciled in ireland or luxembourg or Somewhere else like that, for tax reasons and as a result, if you're investing in something big, like example, vusa the s p 500, which is based in ireland, you won't have to pay stamp duty on that now. The next important thing to remember is how to report and how to actually pay these taxes. Again, i'm actually going to be making a specific video explaining exactly how all of this works, how you go and do the self-assessment and when you need to do it and all the details and i'm gon na be putting that out over the course of the next Week or so so make sure you watch out for that and once i'm done, i'm gon na put that in the description as well. But here is a really brief summary.

The uk tax year runs from the 6th of april one year to the 5th of april. The next year and you then have to go and submit a self-assessment tax return. If you owe taxes now you have to do that by the 31st of january after the end of the financial year. If you don't owe any tax capital gains or dividends, then in most cases you won't have to go and submit the self-assessment return say if you earned less than the zero percent tax bans on either of those things.

However, there are some cases where you still have to, if you, for example, traded large amounts or, if you already registered for self-assessment, you still have to go and do this make sure you go and do your own checks. The other important thing to remember is that you have to pay the taxes due by the same 31st january timeline. So make sure you don't leave it right to the end to go and fill in your self-assessment, because it might take you some time to figure things out and you don't want to go and miss it. You have quite a long window in which to do it.

Don't delay get it done so that it's not hanging over you now, if you found this useful, please go and tap the like button for the youtube algorithm so that more people can go and watch this and they can find it useful too. If you want any specific details on any of the topics that i talked about, make sure you go and check the description, because there's going to be more and more videos where i'm going to go into the depths on some of these topics, i'm going to add Some of them in the description and make sure you check the channel because i'll frequently do updates as well. Thank you so much for watching. I really really appreciate it and, as always i'll see you guys later, you.

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