[ˈɛkwɪti]
Equity is a term that refers to the amount of money the asset owner would receive if they were to sell the asset and pay off any outstanding liabilities.
In finance, Equity is equal to all assets minus all liabilities. So, if a company was to liquidate all its assets, the total value left after paying off all liabilities is equal to the value of equity. When you purchase shares in a Limited Company, you are purchasing equity in the company.
Shareholder equity can be calculated by taking the total assets and subtracting the total liabilities. This information should be available on a business's balance sheet for the year.
If you own Equity in a Limited Company, you may have to pay Dividend tax if you receive more dividends than your tax-free allowance. You may also have to pay Capital Gains tax if you sell the Equity for a profit in the future.
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