What Ron Weasley Could Teach Us About Capital Gains Taxes—And What He Got Wrong

The rules for capital gains versus ordinary income taxes are complex enough to trip anyone up. Just ask Rupert Grint.

H.M. Revenue and Customs (HMRC), Great Britain’s tax authority, presented Grint with a $2.3 million (1.8 million pound) tax bill in 2019 after the agency investigated his return from seven years earlier. Grint lost his appeal in late 2024.

Grint played Ron Weasley in the Harry Potter films from 2001 through 2011. It’s been reported that the films paid him about 24 million pounds (about $30 million) over that decade. According to HMRC, 4.5 million pounds of his related earnings from Harry Potter was wrongly classified as a capital asset rather than ordinary income.

To avoid a tax mistake of your own, be sure you know the rules around capital gains taxes, whether you live in the U.K. or the U.S.

Key Takeaways

• Rupert Grint, aka Ron Weasley, was ordered to pay $2.3 million in back taxes as of late 2024 when lost the actor appeal with the U.K. tax agency over misclassified income.
• In the U.S. and the U.K., long-term capital gains can be taxed at a much lower rate than ordinary income.
• Capital gains derive from the increase in an asset’s value. Ordinary income is essentially produced by performance and labor.

What Did Rupert Grimes Do Wrong?

After its investigation, HMRC successfully argued that Grint had misclassified some Harry Pottery-related earnings (about $5.7 million) in movie residuals as capital gains income, which carries a lesser tax rate. The income was reportedly raised from television, streaming, DVD sales, and more. A tribunal judge agreed with the HMRC and ordered Grint to pay in 2024.

Grint wasn’t the mastermind behind this tax move. He was a minor when he filmed the Harry Potter movies. As Newsweek reported, his father, Nigel Grint, managed his funds. Clay 10 Limited was set up as a company to accept the income. Rupert Grint was named its only shareholder. His father was the company’s director until his death.

Rupert Grint’s Clay 10 Limited income was divided between movie contracts (ordinary income) and “goodwill, records, and rights” (capital gains income) on the company’s 2011-12 tax return.

The HMRC held that the latter wasn’t capital gains but ordinary income.

How Capital Gains Tax Works

A capital gains tax is levied on increases in the value of an asset during an ownership period. A gain is measured from the time an asset is acquired until the time it’s sold. Its value at the time it’s acquired is subtracted from the sales price and capital gains tax is due on the balance.

Important

It’s also possible to have a capital loss, which, in certain cases, can be tax-deductible.

Capital gains tax rates in the U.S. are based on how long you own the asset. It’s a short-term gain if you hold the asset for one year or less. These gains are taxed along with your ordinary earned income according to your tax bracket. A long-term gain occurs if you hold the asset for over a year. These gains are taxed at lower rates that are based on your total taxable income. They’re 0%, 15%, and 20% as of 2024, with a few exceptions.

Compare this with the ordinary income tax rates, and you’ll understand why someone would want to classify ordinary income as capital gains. The ordinary income tax rates range up to 37% as of 2025 based on your top dollar of income.

U.K. vs. U.S. Capital Gains

The U.K. capital gains tax that Grint grappled with is set up much the same as the tax in the U.S. Gains are calculated in the same way: What you bought it for is subtracted from what you sold it for. Capital gains tax is due on the balance. The U.K. provides a tax-free allowance of 3,000 pounds (1,500 pounds for trusts). You only have to pay capital gains tax on your gains above this amount.

The top ordinary income tax rate was reportedly 50% at the time Grint paid the tax associated with his investigated return and the top capital gains rate was 28% at that time, and an entrepreneurs’ relief clause reduced it to 10% for the first 10 million pounds.

Most people determine their tax obligation (or have a pro do it for them) using software that automatically makes the computations. You can use a capital gains calculator to get a rough idea of what you may pay on a potential or actualized sale.

American Capital Gains Tax Rates for 2025

How to Protect Yourself

Even if you’re not a Harry Potter star or a famous actor, you’ll want to correctly classify your income at tax time whether you pay taxes to the U.S. or the U.K. Protecting yourself against misclassifying your ordinary income as capital gains begins with understanding the basic rules.

Income from tax-advantaged retirement accounts such as traditional (non-Roth) individual retirement accounts (IRAs) and traditional (non-Roth) 401(k)s is ordinary income in the U.S., although you don’t have to pay tax on these gains until you withdraw the money. And your contributions lower your taxable income, which lessens the tax bill.

Income from the sale of assets like securities or real estate is typically capital gains. There are exceptions in the U.S. based on collectibles and owner-occupied real estate, so if you have any questions about how to classify income, it’s best to consult a tax expert.

The Bottom Line

Capital gains versus ordinary income comes down to the source of the income in question. It can be a complicated distinction. Your safest bet is to consult with a tax advisor or hire a professional to prepare your tax return so you get it right and don’t end up walking in Rupert Grint’s shoes.