Thinking of selling your shares in a company? Whatever your reasoning, it’s important to know the ins and outs of selling up.
Below, we take a look at the reasons why people sell their shares and how to sell them.
Selling shares is not something that should be taken lightly.
There are ways and means of ensuring that doing so fits with your wider investment goals.
There are also various avenues available to those that do want to sell up.
The better you understand what selling shares involves, the less likely you are to lose money unnecessarily.
There’s no set way of selling shares, but those that are knowledgeable about the pitfalls will be better equipped to handle the process.
How to sell shares
Most people looking to sell shares will do so via a brokerage, like IG or Hargreaves Lansdown.
Most brokerages in the UK offer investors the options of selling shares online, on an app or over the phone.
It’s worth noting that the last option can incur substantial fees for the service.
Before selling up through your broker, you’ll be able to see just how much money you’ll receive before proceeding with the sale.
The exceptions to the above are those that own private equity shares and opt to sell them directly to another investor.
In these circumstances, a brokerage service is not needed — but the private company involved will usually have to approve the sale.
Why do people sell shares?
There may be all manner of reasons why investors might want to sell their shares.
The likelihood is that something drastic has changed. But depending on your own experience with investments, you should really consider how valid your reasoning is behind selling up.
Rash decision-making and stocks and shares trading don’t tend to go hand in hand.
So, if you’ve spotted that share prices have dropped in a company you invest in, selling up immediately isn’t necessarily the correct response.
Take the emotion out of it, and don’t sell because of impatience, excitement or fear.
There are, of course, plenty of viable reasons why you might want to sell your shares.
A company that you are invested in might be undertaking large-scale corporate restructuring or may have pursued a number of important decisions that you disagree with.
It may be simpler; the company you have shares in may have been deteriorating in value for some time, so now is the time to cut your losses.
Or you want to balance out your portfolio and sell shares in one sector to fund the purchase of those in another.
And not forgetting that sometimes, investors just need access to cold, hard cash — and selling shares to liquidate your holdings into currency is a way to get there.
What platform should I use to sell shares?
The cost of selling shares is dependent on which platform you use.
Although some online platforms won’t charge you, most brokerages will charge a commission for trading in your shares — either as a flat fee, or a percentage.
Before selling up, it’s important for you to look into what fee you’ll be charged through your brokerage by doing so.
This can influence whether you sell all of your shares in one go — to avoid multiple charges — or sell them off gradually, if there are no charges on your sales.
Learn more: what is CFD trading?
Are there any taxes I should look out for?
Alongside the fees from your brokerage, selling your shares could see you encounter tax charges — depending on how much money you make from the sale, and whether you are using a General Investment Account (GIA).
Every tax year, investors using a GIA will have a certain allowance to use up before paying tax on their investments — this is called a Capital Gains Tax (CGT) allowance.
For the 2022/23 tax year, the CGT allowance is £12,300.
However, it is halving to £6,000 from 6 April 23, and halving again to £3,000 the following tax year.
Each tax year, your investments can grow by this set amount before tax needs to be paid, while any above can be liable for tax.
If you are selling your shares because they have dropped in value, you won’t need to pay tax as there has not been any capital gain made.
Any shares you hold in an Individual Savings Account (ISA) can be sold without paying CGT, hence why they are so popular with investors.
Selling shares is a big decision that can have a real impact on your investment journey.
Before doing so, it helps to get some expert advice on how to proceed.
Find your perfect financial adviser through Unbiased, and put your financial future first.