The concept of capital gains tax is pretty simple. When you buy a stock and sell it for a profit, an investor may be liable to pay tax on that profit.
For example, if an investor buys a stock for $10 and sell it for $25, $15 would be subject to capital gains tax. You simply subtract the original investment from the price of the investment when you sold it.
In many countries, investors don’t pay any capital gains tax at all until they earn a certain amount in profit. In the UK, investors don’t pay any tax until they earn more than £12,300 in capital gains.
When it comes to paying capital gains tax, investors usually need to register with their local tax authority. In the UK, investors should sign up for self-assessment on investment returns – the same applies on dividends.
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