We have already compared share trading fees in our article on How To Buy Shares Online In Ireland .
We are now providing some information about the taxation of any profits made from buying and selling shares.
Investing in Shares is becoming more widespread in Ireland as online share trading platforms become more widespread and share trading fees reduce.
However – many people might not realise that they might have to pay capital gains tax on any profits made when the shares are sold.
Capital Gains Tax Summary
If you sell shares (or any item of property) for a higher price than you originally paid for it, you are deemed to have made a capital gain. This capital gain is subject to a tax called Capital Gains Tax (CGT) – which is currently charged at a rate of 33% in Ireland.
The first €1,270 of taxable gains in a tax year are exempt from CGT. (The CGT on €1270 would be €423)
You can also deduct any trading costs from any profits. We have outlined an example of CGT calculation below.
(For comparison – In the UK the annual CGT exemption is £12,300 )
Calculation of Capital Gains Tax on Shares in Ireland
- You purchased shares in January 2010 at a cost of €5,000 including stamp duty and trading fees
- You sell them in December 2020 for €8,000. (after brokers fees deducted)
- Chargeable Gain = €3,000
- Deduct: Personal CGT exemption of €1,270
- Net Chargeable Gain = €1,730
- Chargeable @ 33% Capital Gains Tax due= €570.90
- Profit after CGT = €2429.10
When Do You Have to Pay CGT ?
For disposals made between:
- 1st January and 30th November , you must pay CGT by 15th December of the same year.
For disposals made between:
- 1st December and 31st December , you must pay CGT by 31st January of the next year.
It doesn’t matter if the proceeds from the sale of shares are still with your broker – CGT is due as soon as you sell the shares.
You can register for CGT and pay CGT using Revenue’s online service ( ROS )(or myAccount if you are PAYE ) .
You need to file a tax return by 31st October in the year after the date of disposal. Revenue says you must do this even if no CGT is due because of reliefs or losses
How to Reduce CGT on Sales of Shares in Ireland
The annual tax-free CGT exemption of €1270 cannot be carried forward from year to year. So to reduce or avoid some Capital Gains Tax it is possible to do the following.
- If you have shares that have increased in value you can make a disposal of a sufficient number of shares each tax year to give a gain of €1,270 which is equal to the annual tax-free exemption.
- The shares disposed of can be immediately re-acquired if you wish to retain ownership of them.
These transactions are sometimes referred to as “Bed & Breakfast” sales. You need to consider any charges e.g. Brokers fees, Stamp Duty , and compare it to the tax saving. (Stamp duty on sale and purchase of 1% on Irish shares and 0.5% on UK shares for example ). The maximum cash value benefit of using the €1270 annual exemption is €419 per person.
You can check some brokerage fees on our comparison of online share dealing prices in Ireland
Example of Reduced Capital Gains Tax on Shares in Ireland
- You purchase 10 Irish shares in January 2021 at a cost of €500 each
- In October 2021 they are worth €800 each. (Each share has gained €300 )
- You sell 4 shares for €3200 – creating a capital gain of €1200 – which is exempt from CGT.
- You buy back the same 4 shares (assume for the same price). Stamp Duty @ 1% is €32.
- In another years time, you sell all 10 shares for €10000 (€1000 each)
- Your total CGT liability will be lower because the 4 shares you bought back the previous year cost you €3200 not the original price of €2000.
- Gain on the 6 shares bought in 2021 is €500 each – a total of €3000
- The gain on the 4 shares sold and bought again for €800 each in October 2021 is just €200 each – a total of €800.
- The total gain on all 10 shares is €3800
- Less the €1270 exemption = €2530
- CGT @ 33% of €2530 = €834.90)
- If the sale and repurchase didn’t take place in Oct 2021 – the total capital gain would have been €5000 and CGT would have been €1230.90, an extra €395 profit (less the extra stamp duty of €32).
Of course, you need to also take into account the broker fees for selling and re-purchasing. At somewhere like DEGIRO it will be negligible – but not at some of the other brokers.
You can check some of the main broker fees on our comparison of online share brokerage fees
Offsetting Losses on Shares
If you have shares that have gone down in value and you wish to use the loss incurred on the shares against other gains, then you must dispose of the shares in the same tax year as other shares sales upon which you have made a gain.
Sometimes you may want to keep the shares that have gone down in value in the hope of them increasing in value in the future. To get the tax benefit of the reduction in value you must dispose of the shares. You can, if you wish, re-acquire the shares but you must wait for a period of four weeks before doing so to ensure that the loss realised can be offset against other gains. (Just hope the price doesn’t shoot up in those 4 weeks !)
Taxation of Share Dividends
Read more here about the Taxation of share dividends in Ireland .
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