Content Creators' Guide: Navigating Tax on Investments

Stocks and Shares Investments

Stocks and shares have been around for a while and are a great way to grow your wealth.

In the UK, you can use tax-efficient accounts like Individual Savings Accounts (ISAs) to grow a portfolio of stocks and shares, from large index funds to individual stocks. These accounts allow you to invest up to £20,000 per tax year, with the advantage of trading stocks in a tax-free wrapper. You can open up a Stocks and Shares ISA as an individual from various brokerages and providers.

Similarly, you can simply open up an account with various brokerages to just invest into stocks and shares, without the tax benefits of an ISA. This means that any profits you make from selling your shares would be liable for Capital Gains Tax (CGT). Any profits made above the £1000 trading allowance will be subject to Capital Gains, and this needs to be declared to HMRC through a self-assessment form.

Another method you could use is investing through your business. The advantage is that you will be subject to a maximum of 25% in Corporation Tax, whereas you could be subject to higher taxes of up to 45% as an individual once your income from investments reaches a higher tax bracket.

What is Capital Gains Tax? 

It is a tax on any profit you make on selling, gifting, swapping, or transferring ownership of an asset that has increased in value. This is known as the disposing of an asset. 

The Capital Gains Tax (CGT) allowance for individuals in the 2024/25 tax year is £3000, down from £6000 in 2023/24 and £12,300 in 2022/23. 

Capital Gains Tax (CGT) Rates by Taxpayer Category

Property Investments

Many view property as a secure way to achieve long-term wealth. Investing in property through a business is more tax efficient even though there are incentives for investing personally, through capital gains allowances. If you invest personally using business funds, this would mean taking money out of the business, which would be taxable, leaving you with less to invest. 

To invest in property, alongside your trading business, you can set up another company solely for investing in property. The funds can then be transferred between the two companies, in an A – B structure as a loan, or you could create a group structure. 

Group structures are tax efficient, allowing you to mitigate risk in case your primary trading company gets hit with potential penalties. In a group structure, a holding company would be created on top of your primary trading company, where it can receive profits from its subsidiary tax-free as dividends. The holding company will control the funds and not be affected by any penalties from the primary trading company. Another company can be created to invest in property, where the holding company would transfer funds via a loan.

When it comes to investing in property, HMRC says the following about tax on your investments:

• Buy-to-let income is subject to income tax
  
  
• CGT applies when you sell a property that's not your main residence
  
  
• Stamp Duty Land Tax (SDLT) is payable on property purchases over a certain threshold 

It's important to keep accurate records of your property investments and expenses to ensure you're claiming all eligible deductions.

Cryptocurrency Investments

Cryptocurrencies have become a trendy investment choice for creators.

You can either invest personally or through your business, so you are only subject to corporation tax. With cryptocurrency, you are taxed on the disposal. For example, if you own Bitcoin and would like to transfer some profits into a stablecoin e.g. USDT, that is classed as a disposal. This will have to be declared as a capital gain, to understand how much profit was made before paying tax. 

There are software tools like CoinTracker to do the complicated calculations, which you can link with major cryptocurrency exchanges and help determine how much was invested and the resulting disposal. 

When it comes to investing in crypto, HMRC says the following about tax on your investments:

• Profits from buying and selling crypto are subject to CGT
  
  
• Mining or staking rewards are typically treated as income
   
• You must report crypto gains and losses on your tax return 

Seek advice from an accountant if you need assistance.

Tax Planning Strategies for Content Creator Investors

To maximise your returns while staying compliant, consider these strategies:

1. Utilise your annual CGT allowance
   
   
2. Time your investments and disposals strategically
   
   
3. Keep meticulous records of all investment activities
   
   
4. Consider seeking professional advice for complex situations

Maximising Returns While Staying Compliant

Understanding investment tax is crucial if you want to grow your wealth. Knowing the tax implications will help you make informed decisions and avoid surprises come tax season, whether you're investing in stocks, property, or cryptocurrency.

At Capture, we provide expert guidance on tax planning and compliance, allowing you to make tax-saving strategies to grow your wealth. Contact Capture Accounting today to ensure you are compliant with your investments.