CGT & Investments
Discussion
Having started investing in stocks and shares last May (you might have seen me hanging around the biggest gamble thread) I'm now thinking about tax implications. I was initially expecting to invest circa £500 a month so didn't see CGT as a looming issue but for various reasons I've managed to invest a fair bit more than that so I've got a couple of queries with which I'd appreciate a bit of help.
1. I've got a basic share account with the Share Centre which will be moving over to II in the next few days. I assume as it's currently valued under £20k I can convert it to a DIY stocks & shares ISA to make any earning tax free. If I sell stock at a profit does this money stay in the protective boundaries of the ISA so I could in theory put in £20k, sell shares for a profit and reinvest that money within the ISA. Would I still be able to add £20k cash to it in the tax year?
2. If I have a share account that goes up in value by £10k this year on paper (value of stock) then another £10k next tax year then I sell at a net £20k profit next year, would I be liable for CGT on the £7.5k above my annual allowance or could I say "It only went up by £10k in the year in which I sold the stock therefore it's under the threshold?" I guess a away around this would be to sell for the £10k profit in year one and buy back the stock incurring the transaction fees for the trades but then the gain in the following year would only be £10k i.e. below the threshold.
My main source of income s a salary which is subject to PAYE so I don't do self-assessment tax. Should I consider this so I can declare gains net of cost e.g. trading fees, any shares in deficit etc.? Is it even possible for me to request SA taxation? And If I do, I assume this wouldn't affect my PAYE?
Any help appreciated! Many thanks.
1. I've got a basic share account with the Share Centre which will be moving over to II in the next few days. I assume as it's currently valued under £20k I can convert it to a DIY stocks & shares ISA to make any earning tax free. If I sell stock at a profit does this money stay in the protective boundaries of the ISA so I could in theory put in £20k, sell shares for a profit and reinvest that money within the ISA. Would I still be able to add £20k cash to it in the tax year?
2. If I have a share account that goes up in value by £10k this year on paper (value of stock) then another £10k next tax year then I sell at a net £20k profit next year, would I be liable for CGT on the £7.5k above my annual allowance or could I say "It only went up by £10k in the year in which I sold the stock therefore it's under the threshold?" I guess a away around this would be to sell for the £10k profit in year one and buy back the stock incurring the transaction fees for the trades but then the gain in the following year would only be £10k i.e. below the threshold.
My main source of income s a salary which is subject to PAYE so I don't do self-assessment tax. Should I consider this so I can declare gains net of cost e.g. trading fees, any shares in deficit etc.? Is it even possible for me to request SA taxation? And If I do, I assume this wouldn't affect my PAYE?
Any help appreciated! Many thanks.
DRFC1879 said:
Having started investing in stocks and shares last May (you might have seen me hanging around the biggest gamble thread) I'm now thinking about tax implications. I was initially expecting to invest circa £500 a month so didn't see CGT as a looming issue but for various reasons I've managed to invest a fair bit more than that so I've got a couple of queries with which I'd appreciate a bit of help.
1. I've got a basic share account with the Share Centre which will be moving over to II in the next few days. I assume as it's currently valued under £20k I can convert it to a DIY stocks & shares ISA to make any earning tax free. If I sell stock at a profit does this money stay in the protective boundaries of the ISA so I could in theory put in £20k, sell shares for a profit and reinvest that money within the ISA. Would I still be able to add £20k cash to it in the tax year?
2. If I have a share account that goes up in value by £10k this year on paper (value of stock) then another £10k next tax year then I sell at a net £20k profit next year, would I be liable for CGT on the £7.5k above my annual allowance or could I say "It only went up by £10k in the year in which I sold the stock therefore it's under the threshold?" I guess a away around this would be to sell for the £10k profit in year one and buy back the stock incurring the transaction fees for the trades but then the gain in the following year would only be £10k i.e. below the threshold.
My main source of income s a salary which is subject to PAYE so I don't do self-assessment tax. Should I consider this so I can declare gains net of cost e.g. trading fees, any shares in deficit etc.? Is it even possible for me to request SA taxation? And If I do, I assume this wouldn't affect my PAYE?
Any help appreciated! Many thanks.
Someone with far better knowledge will be along soon I'm sure, but for point 2, the tax is on realised profits; so profits made on goods you bought at one price then sold at another; paper profits aren't actually real, just an indication of the value of your asset. So you'd be liable for GCT on everything beyond the 12.3k allowance (lets see what the upcoming budget does the CGT allowances)1. I've got a basic share account with the Share Centre which will be moving over to II in the next few days. I assume as it's currently valued under £20k I can convert it to a DIY stocks & shares ISA to make any earning tax free. If I sell stock at a profit does this money stay in the protective boundaries of the ISA so I could in theory put in £20k, sell shares for a profit and reinvest that money within the ISA. Would I still be able to add £20k cash to it in the tax year?
2. If I have a share account that goes up in value by £10k this year on paper (value of stock) then another £10k next tax year then I sell at a net £20k profit next year, would I be liable for CGT on the £7.5k above my annual allowance or could I say "It only went up by £10k in the year in which I sold the stock therefore it's under the threshold?" I guess a away around this would be to sell for the £10k profit in year one and buy back the stock incurring the transaction fees for the trades but then the gain in the following year would only be £10k i.e. below the threshold.
My main source of income s a salary which is subject to PAYE so I don't do self-assessment tax. Should I consider this so I can declare gains net of cost e.g. trading fees, any shares in deficit etc.? Is it even possible for me to request SA taxation? And If I do, I assume this wouldn't affect my PAYE?
Any help appreciated! Many thanks.
I assumed that would be the case but thanks for clarifying. So I could in theory sell my shares for up to £12.3k profit on the last day of the tax year then buy them back immediately, losing the value of the spread and the trading fees but then effectively being at zero exposure in the following tax year. Sounds stupid but possibly worth considering?
DRFC1879 said:
1. I've got a basic share account with the Share Centre which will be moving over to II in the next few days. I assume as it's currently valued under £20k I can convert it to a DIY stocks & shares ISA to make any earning tax free. If I sell stock at a profit does this money stay in the protective boundaries of the ISA so I could in theory put in £20k, sell shares for a profit and reinvest that money within the ISA. Would I still be able to add £20k cash to it in the tax year?
It's not a conversion as such. You will sell shares and then pay up to £20k into your new ISA. Any profit from selling, unrealised gains, dividends, bank interest etc. are tax free and remain in the ISA 'wrapper'.Did you mean next tax year in your last sentence? If so, yes.
DRFC1879 said:
I assumed that would be the case but thanks for clarifying. So I could in theory sell my shares for up to £12.3k profit on the last day of the tax year then buy them back immediately, losing the value of the spread and the trading fees but then effectively being at zero exposure in the following tax year. Sounds stupid but possibly worth considering?
No, you cannot go back into the same stock/fund for 30 days after selling them. It's a common practice (used to be called bed & breakfast) but have a look at Bed & ISA:https://www.hl.co.uk/investment-services/isa/bed-i...
Don't leave it until April 4th to do this - there are delays & you'll miss out.
Thanks chaps. Thought it looked like too simple a loophole!
So to transfer my current shares into an ISA I'd have to sell them all, put the cash into the ISA then re-buy them which would cost me the trading fees and the value of the spread. Bugger.
As it happens I have circa £40k cash coming in from something else so I'll keep my current portfolio as it is, open an ISA with £20k cash this year and add the remaining £20k next tax year. I assume that's ok?
So to transfer my current shares into an ISA I'd have to sell them all, put the cash into the ISA then re-buy them which would cost me the trading fees and the value of the spread. Bugger.
As it happens I have circa £40k cash coming in from something else so I'll keep my current portfolio as it is, open an ISA with £20k cash this year and add the remaining £20k next tax year. I assume that's ok?
DRFC1879 said:
Thanks chaps. Thought it looked like too simple a loophole!
So to transfer my current shares into an ISA I'd have to sell them all, put the cash into the ISA then re-buy them which would cost me the trading fees and the value of the spread. Bugger.
As it happens I have circa £40k cash coming in from something else so I'll keep my current portfolio as it is, open an ISA with £20k cash this year and add the remaining £20k next tax year. I assume that's ok?
That sounds OK. Do you know what your current capital gain is on your shares? Roughly of course, in relation to the tax free allowance. Are they held as certificates or in a CREST account?So to transfer my current shares into an ISA I'd have to sell them all, put the cash into the ISA then re-buy them which would cost me the trading fees and the value of the spread. Bugger.
As it happens I have circa £40k cash coming in from something else so I'll keep my current portfolio as it is, open an ISA with £20k cash this year and add the remaining £20k next tax year. I assume that's ok?
Yes, it's well under the limit at the moment but as I'm ramping up my investment I though it's better to look at this now rather than regret it later! They're in a simple online share account which I assume may be a CREST account as it's all electronic.
I love PH for this sort of thing, I'm really grateful for the sharing of knowledge. Thank you all.
I love PH for this sort of thing, I'm really grateful for the sharing of knowledge. Thank you all.
DRFC1879 said:
Thanks chaps. Thought it looked like too simple a loophole!
So to transfer my current shares into an ISA I'd have to sell them all, put the cash into the ISA then re-buy them which would cost me the trading fees and the value of the spread. Bugger.
As it happens I have circa £40k cash coming in from something else so I'll keep my current portfolio as it is, open an ISA with £20k cash this year and add the remaining £20k next tax year. I assume that's ok?
Sounds OK and sensible but are the fees and spread material?So to transfer my current shares into an ISA I'd have to sell them all, put the cash into the ISA then re-buy them which would cost me the trading fees and the value of the spread. Bugger.
As it happens I have circa £40k cash coming in from something else so I'll keep my current portfolio as it is, open an ISA with £20k cash this year and add the remaining £20k next tax year. I assume that's ok?
If you have a spouse then then they could use their allowance as well.
FYI Pensions eg. SIPPs also offer similar tax benefits as an ISA with the added bonus of income tax relief on contributions but of course you can't withdraw funds until age 55+. There's an annual contribution allowance of £40k per year.
Thanks Leo, The fees and spread would cost me in the region of 7% so I may as well keep the account that I've got now in one place and draw out within the limits as and when required.
I no longer have a spouse and that's a very good position for me!!
Also thank you for the note on SIPP. I'm planning on a mix of short-ish term (save for 3 years and buy a new house) and longer-term investment so I think S&S ISA is the way to go for now but as I look further into the future a SIPP could make sense.
I no longer have a spouse and that's a very good position for me!!
Also thank you for the note on SIPP. I'm planning on a mix of short-ish term (save for 3 years and buy a new house) and longer-term investment so I think S&S ISA is the way to go for now but as I look further into the future a SIPP could make sense.
DRFC1879 said:
Thanks chaps. Thought it looked like too simple a loophole!
So to transfer my current shares into an ISA I'd have to sell them all, put the cash into the ISA then re-buy them which would cost me the trading fees and the value of the spread. Bugger.
As it happens I have circa £40k cash coming in from something else so I'll keep my current portfolio as it is, open an ISA with £20k cash this year and add the remaining £20k next tax year. I assume that's ok?
That's fine, but it's probably worth doing something to defuse the CGT liability, as the CGT allowance is use it or lose it. Read https://monevator.com/defuse-capital-gains-on-shar... for some ideas.So to transfer my current shares into an ISA I'd have to sell them all, put the cash into the ISA then re-buy them which would cost me the trading fees and the value of the spread. Bugger.
As it happens I have circa £40k cash coming in from something else so I'll keep my current portfolio as it is, open an ISA with £20k cash this year and add the remaining £20k next tax year. I assume that's ok?
Yes selling and rebuying in an ISA will cost you fess and spread, but isn't that going to be less than the potential CGT going forward on those unsheltered investments?
If the unsheltered investments were significant then yes, absolutely. But as I've only invested £10k cash so far and currently sit on paper gains of ~30% it would be quite a bonanza for me to smash through the CGT limit. And if I did I could sell off and take out £12.3k profit each tax year.
One issue that has just come to my attention - if you are in position where selling off will crystallise considerable gains ie CGT , it is worth considering an investment in EIS which enables you to defer CGT - just another little know tool.
https://smithandwilliamson.com/en/insights/capital...
I don't know much about this and would be interested in the opinions of those who do know more about this relief.
LeoSayer said:
FYI Pensions eg. SIPPs also offer similar tax benefits as an ISA with the added bonus of income tax relief on contributions but of course you can't withdraw funds until age 55+. There's an annual contribution allowance of £40k per year.
Just so I am clear on the difference between SIPP and ISA (ignore contribution side for a moment). Let us assume I have a SIPP and and ISA with exactly the same investments in each and in a particular tax year I make a £20k gain and get £1k divvies. As I understood it when extracting the gain and the divvies from each the situation is as follows:ISA - No tax on the divvies or the gain. Just extract it and spend it. It doesn't need to be shown on self assessment form.
SIPP (assume I am over 55) - The gain is taxed at CGT rates above the CGT threshold and the divvies are counted as income and taxed as such at your rate.
Am I completely wrong and actually the SIPP is as beneficial as the ISA?
tia
Another question. If your ISA has made a loss in the tax year and you have realised that loss by selling shares (so let us say your £20K investment is now only £15k) can that £5k loss be used to offset the CGT gain from some share sales elsewhere? Or is a gain or loss in an ISA always completely stand alone from other gains/losses you have had in the tax year elsewhere?
tia
tia
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