Capital Gains
Capital gains are the profit you make when you sell an investment for more than you paid for it.
1 min read Learning to Invest
What it means
Capital gains are the profit you make when you sell an investment for more than you paid for it. The gain is the difference between your purchase price and selling price, not the total amount you receive from the sale.
Example
You buy an investment for £2,000 and later sell it for £2,600. Your capital gain is £600.
Why it matters
Understanding capital gains helps you measure how well your investments have performed and understand when tax may apply outside tax-efficient accounts.
Investments held in ISAs are generally free from Capital Gains Tax.
What if I sell for less than I paid?
That's called a capital loss. Losses can sometimes be used to reduce taxable gains, subject to HMRC rules.