Understanding the different types of shares—often referred to as “classes of shares”—is fundamental for investors, entrepreneurs, and company directors alike. Whether you’re starting a business or looking to optimise capital gains on shares, knowing the various share classifications can help you make tax-efficient and strategic decisions.
In the United Kingdom, shares don’t just signify ownership—they also determine voting rights, dividend entitlement, and the structure of capital gains tax on share profits. Furthermore, when raising capital, understanding the nuances of SEIS and EIS advance assurance may determine how attractive your company is to investors.
At Capital Gains Tax Expert, we provide expert tax planning and consultancy focused on helping individuals and companies navigate the complexities of share ownership, investment schemes, and HMRC compliance.
In this comprehensive guide, we will break down:
- The main types and classes of shares in the UK
- How different shares affect voting, dividends, and capital rights
- Tax implications, including capital gains tax on share profits
- How SEIS and EIS schemes relate to share structure
- When to seek expert tax advice
Let’s get started.
What Are Share Classes?
In simple terms, a class of share refers to a category of shares that carries distinct rights and obligations. Companies often issue multiple share classes to cater to different investors, management teams, or funding stages.
Each class of share may differ in:
- Voting rights
- Dividend entitlement
- Right to capital upon winding up
- Conversion or redemption conditions
Choosing the right structure is not only key to control and profit sharing but also crucial for capital gains optimisation.
To better understand your options and tax implications, explore our services tailored to share structuring and investment schemes.
The Main Types of Shares in the UK
1. Ordinary Shares
These are the most common type of shares and are usually issued to founders, employees, and early-stage investors. They carry:
- Voting rights (typically one vote per share)
- Dividend entitlement (subject to availability and board approval)
- Rights to capital in the event of company winding-up (after debts are paid)
Ordinary shares can be subdivided into Class A, B, C, etc., with varying conditions.
2. Preference Shares
Preference shareholders are paid dividends before ordinary shareholders and often have fixed dividend rates. However, they usually have:
- No or limited voting rights
- Priority on capital distribution upon winding up
- Can be redeemable or convertible in some cases
These are typically attractive to external investors looking for more stable returns.
3. Non-Voting Shares
As the name suggests, these shares do not carry voting rights, but may entitle the holder to dividends or capital gains. They are often issued to employees or family members.
While they offer no control, they can be tax-efficient depending on your personal income and CGT status. For tailored advice, our about us page explains our specialism in strategic planning.
4. Redeemable Shares
These shares can be bought back by the company at a future date, usually at the option of the company. Commonly used for temporary shareholders, such as seed investors or founders exiting the business.
Redeemable shares can be structured to minimise capital gains tax on share profits.
5. Growth Shares
Ideal for startups, growth shares are designed to provide value only after the company reaches a certain valuation threshold. They are often used for:
- Employee incentive schemes
- Protecting early-stage investors from dilution
- Aligning rewards with long-term performance
Growth shares can have significant capital gains implications, which we explore in our blog.
Why Share Class Matters: Tax & Legal Implications
Share class affects not just ownership structure but also how income and gains are taxed. Here’s how:
🔹 Capital Gains Tax on Share Profits
If you sell your shares for more than you paid, you’re liable to capital gains tax (CGT). The type of share, the length of ownership, and eligibility for reliefs like Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) will affect your tax bill.
A well-structured share class setup can reduce or defer CGT liability, especially in exit scenarios or business sales.
🔹 Dividend Taxation
Different classes can allow a company to declare different dividends for each class, offering flexibility for tax planning. For instance, directors and shareholders can receive income in a more tax-efficient manner.
This strategy is commonly used in family-owned businesses or close companies.
SEIS & EIS Advance Assurance: How Share Structure Affects Investment
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) offer significant tax incentives for investors in early-stage companies. However, strict share structure rules apply.
✅ To qualify for SEIS or EIS:
- The shares must be new, full-risk ordinary shares
- Shares must not be redeemable or carry preferential rights
- The company must obtain advance assurance from HMRC
Advance assurance is a crucial step in proving to potential investors that your business qualifies for the scheme. At Capital Gains Tax Expert, we specialise in SEIS EIS advance assurance applications to help your funding rounds run smoothly.
Benefits of SEIS/EIS for Investors
- Up to 50% income tax relief
- Capital gains tax deferral
- Exemption from CGT on sale after 3 years
- Loss relief on failed investments
For founders and directors, this means better chances of securing funding while offering investors a tax-advantaged route.
Choosing the Right Share Class for Your Business
Whether you’re launching a startup or restructuring a mature business, the right share class strategy can impact:
- Control and voting rights
- Access to tax reliefs and funding
- CGT liabilities on future exits
- Investor appeal
Common Scenarios:
| Business Goal | Recommended Share Type |
| Raise early-stage investment | Ordinary Shares (SEIS/EIS eligible) |
| Incentivise employees | Growth Shares or Non-Voting Shares |
| Protect founding equity | Class A/B Ordinary Shares |
| Enable founder exit | Redeemable or Preference Shares |
Need help structuring your share classes for growth or exit? Our specialists at Capital Gains Tax Expert are here to guide you.
Capital Gains on Shares: Optimising Your Exit
When it’s time to sell your shares—whether due to a business sale, merger, or buyout—capital gains tax can take a substantial cut of your profits. Here’s what you should consider:
- Business Asset Disposal Relief (BADR): May reduce CGT rate to 10%
- EIS exemptions: If held for over 3 years, CGT may be avoided altogether
- Share pooling and gifting strategies: Spread CGT liability over multiple tax years or family members
Our expert-led tax planning services can help ensure your gains are maximised—and your tax bill minimised.
When to Get Professional Advice
If any of the following apply, you should consider expert guidance:
- You’re issuing new shares to raise capital
- You’re preparing for a business exit or sale
- You want to offer equity to employees
- You’re applying for SEIS or EIS advance assurance
- You’ve received shares and want to reduce capital gains tax on share profits
Our team at Capital Gains Tax Expert brings decades of experience in UK tax law, corporate structuring, and investment planning.
Final Thoughts
Understanding the different types of shares isn’t just legal jargon—it’s a foundation for smarter investment, tax optimisation, and business growth. From capital gains on shares to SEIS/EIS eligibility, your share structure can either unlock opportunity or create tax liabilities.
Make sure you’re on the right side of that equation. Whether you’re planning a funding round, incentivising a team, or preparing to exit—we’re here to help.
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