Capital Gains Tax
Also called: CGT, tax on capital gains
Capital gains tax is charged on the profit from selling an asset, not on its value while you hold it. That timing feature is the most valuable thing in investing: an unsold gain compounds untaxed, and holding on defers the bill indefinitely. Rates are typically lower than income tax rates for assets held beyond a year, which is a deliberate policy choice to reward long-term holding — and a long-standing fairness argument.