The short version: Equity means ownership value. In a company, it’s the value of all the shares. In a property, it’s what the place is worth minus any mortgage you still owe.
Company equity
When you buy shares in a company, you’re buying equity. If the company were wound up and all its assets sold, the equity is what would be left to share among shareholders after debts are paid.
Property equity
If your home is worth £300,000 and you owe £200,000 on the mortgage, you have £100,000 in equity. This matters if you want to remortgage, release equity, or sell up.
How does equity affect your tax?
If you earn dividends from shares above your allowance, you’ll pay dividend tax. If you sell shares at a profit above your CGT allowance, you’ll pay Capital Gains Tax. Shares received through employee schemes like EMI have their own rules.
Some investments, like those in EIS or SEIS companies, come with tax relief. And shares held in an ISA are completely tax free.
Got equity income and not sure how it’s taxed? Drop us a line and we’ll explain your situation.
