Portfolio performing well? Bank your profits and you could be liable for capital gains tax…

by , 13 March 2015

When you invest and your shares perform, once you sell your shares, you could be liable to pay tax on your gains.

It all comes down to how much money you make from your investments.

Let's take a closer look…


What is capital gains tax (CGT)?


Capital gains tax (CGT) is a tax you have to pay on any profits you make on the difference between the price you pay for something and what you receive when you sell it.

So when it comes to shares, you may be liable to pay capital gains tax on any profits you make from selling your shares.

You’re only liable to pay capital gains tax on actual profits. So if you still hold shares that are in profit territory, you pay no tax. It’s only once you sell them for a profit that you may have to pay tax.


How much do you have to pay in capital gains tax?


At the moment, the current exemption on capital gains tax is R30,000. That means if you make R29,999 in profits from selling your shares in the current tax year, you don’t pay a cent in tax.

But if your profits exceed R30,000 for the tax year, you’re liable for capital gains tax. If this is the case you’ll pay tax on 33.33% on your capital gains.

Let’s say your income tax bracket is at 30% a year. If you made R45,000 in one tax year in capital gains, you’ll pay 30% on 33.33% of R15,000. That works out at R1,500 in taxes.

If you do have a substantial portfolio and are looking to sell some of your investments, it’s worthwhile speaking to a tax advisor before taking any action.

So there you have it. Why you could be liable for capital gains tax if you bank your profits.

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