Last updated on:
March 17, 2024

Equity represents the value ownership interest in an asset or a company, reflecting the residual interest in the assets of the entity after deducting liabilities. It serves as a crucial concept in both personal finance and corporate finance, offering insights into the value of an investment or property.

Equity in Different Contexts

  1. Company Shares: In a corporate setting, equity refers to the ownership interest held by shareholders in a company, measured by the proportion of shares owned. It represents a claim on the company's assets and earnings.
  2. Property Equity: For real estate, equity refers to the value of a property after subtracting any outstanding mortgage or loan amounts. Essentially, it's the portion of the property that you "truly own."

Tax Implications of Equity

Equity investments and transactions can trigger tax liabilities under various scenarios:

  • Dividend Tax: If you receive dividends exceeding £1,000 from your equity investments in companies, you may be liable to pay dividend tax on the excess amount.
  • Capital Gains Tax (CGT): Selling shares at a profit that exceeds the annual CGT allowance (£3,000 for the 2024/2025 tax year) will require you to pay CGT on the gain.
  • Employee Incentive Schemes: Profits from selling shares acquired through employee incentive schemes like EMI are subject to CGT, though schemes like EIS/SEIS may offer tax-free gains.
  • EIS/SEIS Tax Reliefs: Investments in startups under the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) can offer Income Tax relief and CGT exemptions.
  • Stocks & Shares ISA: Profits or dividends from shares held within a Stocks & Shares ISA are exempt from tax.

Equity Release and Taxes

Equity release schemes, which allow homeowners to access the equity tied up in their property, typically do not incur tax on the released funds. However, it's crucial to consider the long-term financial implications and potential impact on inheritance.


Equity serves as a foundational element of personal and corporate finance, encapsulating the value of ownership in assets and companies. While equity can provide significant financial benefits, it's essential to be aware of the tax responsibilities that come with equity investments and transactions. As tax laws and allowances can change, staying informed and possibly consulting with a tax professional can help you navigate the complexities of equity-related taxes efficiently.

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