Trading Shares Through A Limited Company And Using Rollover Relief

shares roll over relief

When dealing or trading shares, you might consider trading through a limited company rather than a personal account.

If you do decide to trade through a limited company there are some benefits, one of which is rollover relief.

What is rollover relief?

When you sell shares and make a profit this is treated as a capital gain for tax purposes. Which if trading through a limited company would attract a corporation tax at a rate of 19% (at the current time of writing) If you choose to reinvest these proceeds you may be entitled to rollover relief: Rollover relief allows you to purchase similar types of stocks and reinvest those funds including the profits. Doing this allows you to defer the capital gains tax due on the profits from the first sale.

Now, there are lots of rules and regulations that come with this, and it’s not straightforward so it’s important to talk to an accountant before you do this. But essentially this allows you to roll profits into future investments and only pay the tax due once you sell everything and crystalise that gain.

It’s worth noting as well that this applies for many things, not just shares. For example: If you made a capital gain on say a small factory, and then purchased another larger one. You would not need to pay tax on the small factory gain at the time of sale if you are reinvesting those profits. This can be very useful.

As always though, there are nuances, rules and regulations that need to be adhered to. For example, the time frame in which the new asset was bought and the asset must also be a qualifying asset.

So it’s imperative you use an accountant who knows about all the rules, reliefs and regulations. RJF is very experienced in all aspects of tax, and we’ll ensure you never pay more than the correct amount of tax.

Paying Tax

If you are trading shares through a limited company and are crystallising the capital gain, you will have to pay the 19% corporation tax on any profits. Then, if you wish to pay yourself and take the money out of the company, you will be liable to pay any dividend tax which does depend on your personal circumstances.

As such, you may find it better to trade through a personal account. If you decide to do this (and this should be a decision both you and your accountant make) then you will have to pay capital gains on your profits:

The current rates are:

10% for lower rate taxpayers 20% for higher rate taxpayers

However, individuals do have £12,000 capital gains allowance.

For any help or advice with your capital gains whether through a company or personally, speak to us at RJF. We’re more than happy to guide and assist you with your tax affairs. Call us today.