What should I do with Orphan shares?

[KPHs]

Hi, I'm hoping someone won't mind offering some suggestions what I could do with some orphan shares.

I have a dealing account which historically I've used to trade shares to hopefully grow a pot big enough to satisfy the next years ISA allowance. Unfortunately this financial year there was a share split and the shares have done very well. So much so that with the rise in interest rates on my savings (which now include the proceeds of a house sale) I am in danger of going over the £18,570 allowance before having to complete a tax form if I sell all the shares. At all costs I don't want to start filling in tax forms. So does anyone know how I can sell these extra shares without going over over the £18,570 limit or are they going to have to sit there effectively lost.

[Caddyshack]

KPHs said:

Hi, I'm hoping someone won't mind offering some suggestions what I could do with some orphan shares.

I have a dealing account which historically I've used to trade shares to hopefully grow a pot big enough to satisfy the next years ISA allowance. Unfortunately this financial year there was a share split and the shares have done very well. So much so that with the rise in interest rates on my savings (which now include the proceeds of a house sale) I am in danger of going over the £18,570 allowance before having to complete a tax form if I sell all the shares. At all costs I don't want to start filling in tax forms. So does anyone know how I can sell these extra shares without going over over the £18,570 limit or are they going to have to sit there effectively lost.

Why can’t you just sell enough to be under your limit.

I thought that if you are selling shares and using a capital gains tax allowance you should complete a tax return to prove there is no tax due. What are you so adverse to a tax return, it should be minutes of work online.

[KPHs]

Caddyshack said:

Why can’t you just sell enough to be under your limit.

I thought that if you are selling shares and using a capital gains tax allowance you should complete a tax return to prove there is no tax due. What are you so adverse to a tax return, it should be minutes of work online.

Hi Caddyshack. I am selling just enough to be under the limit, but what do I do with the rest? I could let them ride till next year but they may be worth more then and the interest rate on my savings isn't going down fast enough to offset the share price rise. Then there is the dividend reinvestment which will bump it up further.

Regarding completing a tax return my understanding is you only have to fill in a tax form if you have any tax to declare? Is that not correct then?

[Caddyshack]

KPHs said:

Caddyshack said:

Why can’t you just sell enough to be under your limit.

I thought that if you are selling shares and using a capital gains tax allowance you should complete a tax return to prove there is no tax due. What are you so adverse to a tax return, it should be minutes of work online.

Hi Caddyshack. I am selling just enough to be under the limit, but what do I do with the rest? I could let them ride till next year but they may be worth more then and the interest rate on my savings isn't going down fast enough to offset the share price rise. Then there is the dividend reinvestment which will bump it up further.

Regarding completing a tax return my understanding is you only have to fill in a tax form if you have any tax to declare? Is that not correct then?

One of the Accountants will need to answer that. I would never let tax stop me making money, just try and use your allowance each year or pay the tax.

[Simpo Two]

I'd like to have a go at this problem too. How can I buy these troublesome shares?

[deggles]

I think this is called letting the tax tail wag the investment dog. 'Please tell me how I can make less money to avoid paying tax'. Hilarious

[Simpo Two]

deggles said:

'Please tell me how I can make less money to avoid paying tax'. Hilarious

What about giving it to charity? Would that be tax-free?

Slightly in the OP's defence, working out how to attack the huge tottering cake with minimum colateral damage is an issue all investors over a certain £££ face.

[Sheepshanks]

KPHs said:

...I am in danger of going over the £18,570 allowance before having to complete a tax form if I sell all the shares.

I'm not an expert on this, but CGT is kind of separate to income tax. It has its own allowances and rates.

How are you calculating that you'll breach £18,570 - what's the amount made up of?

You can declare capital gains on the HMRC site - I think without having to do a self-assessment, but I suppose they might ask you to do one.

[Ezra]

KPHs said:

Hi Caddyshack. I am selling just enough to be under the limit, but what do I do with the rest? I could let them ride till next year but they may be worth more then and the interest rate on my savings isn't going down fast enough to offset the share price rise. Then there is the dividend reinvestment which will bump it up further.

Regarding completing a tax return my understanding is you only have to fill in a tax form if you have any tax to declare? Is that not correct then?

With all due respect, I think you sound quite confused re offsetting capital gains vs interest etc. I'd suggest having a chat with a tax accountant before doing anything.

[Simpo Two]

Ezra said:

KPHs said:

Hi Caddyshack. I am selling just enough to be under the limit, but what do I do with the rest? I could let them ride till next year but they may be worth more then and the interest rate on my savings isn't going down fast enough to offset the share price rise. Then there is the dividend reinvestment which will bump it up further.

Regarding completing a tax return my understanding is you only have to fill in a tax form if you have any tax to declare? Is that not correct then?

With all due respect, I think you sound quite confused re offsetting capital gains vs interest etc. I'd suggest having a chat with a tax accountant before doing anything.

Googling the various allowances for FY 23/24 I see:

Income: £12,570
CGT: £6,000
Interest: £1,000
Dividends: a very pathetic £1,000 (do your shares pay dividends?)

The top two explain the OP's £18,570 figure, but interest is another allowance so he has a bit more headroom.

I think it would be unwise to skew/compromise investments simply to avoid filling in a tax return.

[KPHs]

Firstly please accept my apologies for the late response. Unfortunately real life keeps getting in the way.

Simpo Two You are quite correct with your calculation how I came to £18,570.00. It is made up of around £4000 dividends and all the rest is monthly interest payments from savings put in notice accounts, gained from the proceeds of my house sale. This financial year I should end with around £18,205.44 in total.

You are right on the big towering cake analogy. I used to think being in a position akin to winning the lottery would be wonderful. Now I'm here I'm not so sure its that easy.

deggles said:

I think this is called letting the tax tail wag the investment dog. 'Please tell me how I can make less money to avoid paying tax'. Hilarious

Hi deggles, actually I think you've given me a way out! Instead of cutting back on tax caused by my shares I can cut back on tax caused by my savings by moving the money when it matures into Premium bonds. I can also release my original capital from the dealing account and buy Premium bonds with that too. Once that money is safely out of the way I would then be free to sell the orphan shares up to £18,570 per financial year without attracting a tax liability.

Does that sound sensible or laughable???

[Simpo Two]

Returns from PBs are tax free, so yes that would solve your tax problem. However you're limiting - unless you win a big prize - potential for future growth. If you were able to feed money into a S&S ISA, then you'd have thousands more options and the returns would be tax free also.

https://www.moneysavingexpert.com/savings/premium-...

But you have to do what you feel comfortable with.

[KPHs]

Simpo Two said:

Returns from PBs are tax free, so yes that would solve your tax problem. However you're limiting - unless you win a big prize - potential for future growth. If you were able to feed money into a S&S ISA, then you'd have thousands more options and the returns would be tax free also.

https://www.moneysavingexpert.com/savings/premium-...

But you have to do what you feel comfortable with.

Thank you Simpo Two. I already have an ISA which generates enough for me to live on. The Premium Bonds will just shelter my capital till I can work out what I can do with it. The money released from my dealing account will now go into my ISA in full.

Thanks everyone for your input, very useful.

[Jackals]

KPHs said:

Once that money is safely out of the way I would then be free to sell the orphan shares up to £18,570 per financial year without attracting a tax liability.

You'll still need to pay CGT if the gain is more than £6,000 this tax year then £3,000 next tax year.

[KPHs]

Jackals said:

You'll still need to pay CGT if the gain is more than £6,000 this tax year then £3,000 next tax year.

Thank you Jackais. I think that only applies if the shares have been sold and I've realised a gain but I'm picking this up one issue at a time. At the moment they are just growing in my account. I may have to look into the share split though and how the new shares are treated for tax.

[Simpo Two]

KPHs said:

Jackals said:

You'll still need to pay CGT if the gain is more than £6,000 this tax year then £3,000 next tax year.

Thank you Jackais. I think that only applies if the shares have been sold and I've realised a gain but I'm picking this up one issue at a time. At the moment they are just growing in my account. I may have to look into the share split though and how the new shares are treated for tax.

Yes, CGT is only payable when you sell and make a gain of £6K+ - but if you don't use that allowance (ie sell some shares) before 5 April then you've lost that tax-free opportunity, and as Jackals says it will be only £3K next year. So if your goal is to dispose of the shares with minimal tax, that's an obvious option IMHO.

Ideally you'd sell as many as possible without hitting the threshold, then transfer the proceeds to an ISA and reinvest in more, as they seem to be doing so well. And then they'd be in a tax-free environment, so you can have cake and eat it.

[Jackals]

Simpo Two said:

KPHs said:

Jackals said:

You'll still need to pay CGT if the gain is more than £6,000 this tax year then £3,000 next tax year.

Thank you Jackais. I think that only applies if the shares have been sold and I've realised a gain but I'm picking this up one issue at a time. At the moment they are just growing in my account. I may have to look into the share split though and how the new shares are treated for tax.

Yes, CGT is only payable when you sell and make a gain of £6K+ - but if you don't use that allowance (ie sell some shares) before 5 April then you've lost that tax-free opportunity, and as Jackals says it will be only £3K next year. So if your goal is to dispose of the shares with minimal tax, that's an obvious option IMHO.

Ideally you'd sell as many as possible without hitting the threshold, then transfer the proceeds to an ISA and reinvest in more, as they seem to be doing so well. And then they'd be in a tax-free environment, so you can have cake and eat it.

Spot on Simpo.

@KPHs After re-reading one of your earlier posts, i think you're going to need to fill in a tax return and pay tax regardless. You mention you're going to receive £18,205.44 in total this financial year, you're £3,635.44 over the allowance for this year. Your total allowance this tax year is £14,570 and will be made up of Income £12,570, Interest £1,000 and Dividends £1,000. You can't add the CGT and Income allowances together.

[Ezra]

Jackals said:

Spot on Simpo.

@KPHs After re-reading one of your earlier posts, i think you're going to need to fill in a tax return and pay tax regardless. You mention you're going to receive £18,205.44 in total this financial year, you're £3,635.44 over the allowance for this year. Your total allowance this tax year is £14,570 and will be made up of Income £12,570, Interest £1,000 and Dividends £1,000. You can't add the CGT and Income allowances together.

As per my earlier post - confusing CGT and interest allowances. My sense is the OP should consult an accountant.