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Capital Gains Tax for Shares

Practical Issues
PinkDalek
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Re: Capital Gains Tax for Shares

#355974

Postby PinkDalek » November 12th, 2020, 7:44 pm

scrumpyjack wrote:Yes the simplest solution is to sweep away all the indexation and taper relief etc and then to have a lower rate of CGT than on income to reflect that those reliefs are no longer available and that a substantial part of 'gains' are simply a reflection of inflation and the devaluation of money, ie not real gains.

Hang on a moment, that's the system we now have, and the reason we got it! Funny the OTS forgot to mention that in their review!


Whereas they did say:

In addition, an increase in rates would highlight other issues:

• the widely held view that it is inappropriate to tax the part of a gain that
has arisen (perhaps over many years) merely because of inflation


Recommendation 2

If the government considers more closely aligning Capital Gains Tax and Income Tax
rates it should also:
consider reintroducing a form of relief for inflationary gains,
• consider the interactions with the tax position of companies, and
• consider allowing a more flexible use of capital losses


Ugh.

tikunetih
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Re: Capital Gains Tax for Shares

#355981

Postby tikunetih » November 12th, 2020, 8:04 pm

What the Office of Tax Simplification does.

We give independent advice to the government on simplifying the UK tax system, to make things easier for taxpayers.


Sure you do.

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Re: Capital Gains Tax for Shares

#355988

Postby Gengulphus » November 12th, 2020, 8:25 pm

Lootman wrote:
Gengulphus wrote:And the suggestion in this report that the CGT allowance might be reduced to a third or less of its current amount while still acting as an "administrative de minimis" should serve as a reminder that there is a possibility that one might one day have to account for CGT, even for those for whom it currently seems an impossibly distant prospect: tax law changes can potentially make much more major differences to such matters than one thinks are at all likely to happen in the normal course of events.

I.e. basically, my suggested policy on keeping share transaction records is "if you still own the shares, keep the transaction details, however old they are - and if you cease to own them, continue holding them for at least a few years". I would add that in these days of cheap computer storage and the transaction details generally being in electronic documents rather than paper documents, it is actually easier to keep the records than to dispose of them. With paper records, there comes a point where one needs to go through them, weeding out the no-longer-relevant ones, because one simply doesn't have the physical space to store the old records - even though doing the weeding out may be quite a bit of work, and disposing of the weeded-out paper documents safely more work. But with electronic documents, a very easy method is just to start a new folder each tax year and leave all the old tax years' folders untouched (or just move them en masse to a back-up disc if one's main disc is uncomfortably full).

It is of course prudent to keep transaction records, including subsequent events that effect the cost basis such as corporate actions. But the problem in many cases is that people will not have kept records of things that they previously had no reason to keep a record of.

Not quite - the problem is that they have not kept records of things that they previously thought they had no reason to keep a record of. And I agree that it is a problem that the government would be well-advised to avoid because a lot of taxpayers are likely to be affected by it - but I'm also saying that taxpayers would be well-advised to keep the records in order to 'immunise' themselves against such problems in case the government fails to realise that (it's not as though governments have a wonderful record of avoiding creating awkward problems for taxpayers...). Basically a belt-and-braces approach in which the taxpayer hopes the government will supply the belt, but supplies the braces themselves in case it doesn't.

Lootman wrote:So for example since indexation went away, there has been no need to retain the original purchase date of a share, because it does not affect the determination of the capital gain when sold (leaving aside the special case of the 30 day rule). So I for one have not kept such records for my positions. I can tell you the number of shares and the cost basis, and I will know the date of sale and the net proceeds. But the original purchase date and dates of any subsequent transactions is not material.

So if the CGT rules were now changed to make that important again, say if indexation were reintroduced, then I would have a problem.

You would indeed, and I'm certainly not advocating that the government should reintroduce indexation and make that a problem for you and many others (who incidentally might include me for a few of my shareholdings, as a few of my records have gone walkabouts - hopefully just mislaid rather than permanently lost).

Lootman wrote:Now you might be more thorough than I and keep that anyway. But then you might still be vulnerable to some other kind of rule change that requires other data that you have to date had no reason to think you would ever need.

I have kept pretty complete records, yes, but I would describe it more as having being indolent (especially in the early years when I had few shareholdings) than as being thorough. That's because for many years, I almost always just put most share-related documents I received into the appropriate share's folder in my filing cabinet and more-or-less forgot about them unless something required me to look at one of them (usually a takeover of one of the privatised utilities).

That did build up to too much paper eventually, but that was at about the same time as I started having to deal with CGT and so started to understand that information in those documents might be important some day - and in addition, that happened around 1998, when the major shift from indexation to taper relief happened, so I also became very aware that CGT rules could be changed quite markedly. I've been reducing my paper records since, but if they contain any data specific to a shareholding I still own or have only disposed of in the last few years, I keep the original documents - and even after that, if original paper documents I want to get rid of contain such data, I make certain they've been scanned into my computer before getting rid of them. And of course, most shareholding-related documents these days are available in electronic form, so it's quite rare for new needs to do such scanning to arise at all by now.

As regards new rules requiring data that I don't have, that approach means that it's far more likely to be data I never had and cannot obtain now than data I did have once but that got rid of. Which could happen, of course - but that's not really something that one can take precautions against.

And just to be clear, I'm not expecting everybody to have ended up in as good a position as I am with regard to such records - I could easily have much less complete records than I do if I'd had a significant reason to reduce my accumulated paper records before CGT became relevant to me and I started to understand both what data were important for CGT and that it can change. Such reasons include the paper records having accumulated for several more years, or wanting to reduce the amount of stuff needing moving during a house move, either of which could easily have happened.

Lootman wrote:The correct approach therefore, in my view, would be to grandfather existing positions into the current rules, and have the new rules apply only to newly established positions.

Agreed, but I'm by no means certain the government will take the correct approach... So safeguarding oneself as far as reasonably possible against the government taking an incorrect approach seems prudent - though I agree that what people have done in the past might (and probably often does) seriously limit what is reasonably possible.

Gengulphus

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Re: Capital Gains Tax for Shares

#356108

Postby Adamski » November 13th, 2020, 10:18 am

My guess is that they'll bring in a watered down version. Politically they'd be opposition from tory mps and voters if they got too heavy. Part of this is because of the uk stock market tanking with covid, they're worried at the treasury that capital gains receipts will be lower next year. Aligning with income tax is a labour policy and can't see Rishi going full labour on us.

There's no way this would pay for debts run up for covid. CGT is just too small a tax. They're going to have to increase income tax, by a lot, but that's even more unpopular as effects more people.

What I see is we won't pay down the debt with new taxes. They'll up taxes a bit but not enough to repay the debt. It'll just be tinkering for political purposes.

Covid has turned the uk and europe economies into japan, high debt and low growth.

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Re: Capital Gains Tax for Shares

#356841

Postby Adamski » November 15th, 2020, 6:08 pm

As lootman says any change is likely to be forward dated. In which case those lucky to have unsheletered gains, can crystallize gains and utilise the cgt threshold on, before 5 April.

Hopefully Rishi will bin this Corbynesque nonsense, as with the Laffer curve, this has no chance of increasing tax much, but provide an annoyance in keeping additional records.

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Re: Capital Gains Tax for Shares

#356846

Postby Lootman » November 15th, 2020, 6:28 pm

Adamski wrote:As lootman says any change is likely to be forward dated. In which case those lucky to have unsheletered gains, can crystallize gains and utilise the cgt threshold on, before 5 April.

Hopefully Rishi will bin this Corbynesque nonsense, as with the Laffer curve, this has no chance of increasing tax much, but provide an annoyance in keeping additional records.

Actually I did not say that it would be "likely" to be forward-dated, only that I thought that it should be. Somebody else here pointed out to me that CGT rates have been changed overnight during a tax year before, such that transactions before the change date were handled under the old rules and rates, and transactions after that date were handled by the new rules and rates.

I will probably liquidate many of my taxable positions that are showing a gain if I can, depending on what the change turns out to be. Painful though, as my CGT bill would run into six figures. Keeping the losing positions would be prudent, plus enough gainers to utilise whatever is left of the annual CGT-free allowance in the following years.

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Re: Capital Gains Tax for Shares

#356856

Postby scotview » November 15th, 2020, 7:21 pm

In anticipation of possible imminent CGT changes, could you comment on this CGT situation, if it is appropriate within this thread.
An individual with no earned income will have say £2000 income this year (2019/2020) due to starting their Old Age Pension. That person's tax allowance is £12,500.
Now, assume that this person has a CGT bill of say £40000 in year 2019/2020. That person's CGT allowance will be £12,300.
Can the remaining income allowance of £10,500 be added to the CGT allowance of £12,300 giving a total effective CGT allowance of £22,800 to help offset the £40000 CGT bill ?
Hope you understand this query, thanks.

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Re: Capital Gains Tax for Shares

#356859

Postby JohnB » November 15th, 2020, 7:32 pm

You can't move allowances between Income Tax and Capital Gains tax, its just the Capital Gains tax rate rises for (income - income allowance + gains - gains allowance) > HRT threshold . https://www.gov.uk/capital-gains-tax/rates

In your case you will pay no tax on the income, and 10% on 40000-12300

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Re: Capital Gains Tax for Shares

#356869

Postby scotview » November 15th, 2020, 7:51 pm

Thanks JohnB for the feedback.

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Re: Capital Gains Tax for Shares

#357019

Postby Adamski » November 16th, 2020, 1:25 pm

@lootman, thanks for clarification.

I assume LFs know, but if you don't need the cash, and to avoid cgt, would Bed & ISA realised gains to the level of the CGT allowance and not pay any tax.

I have some in unsheltered dealing accounts but so far have cut losses and run gains so have realised losses only, but will may need to plan more carefully depending on the changes made.

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Re: Capital Gains Tax for Shares

#360144

Postby Parky » November 26th, 2020, 8:12 am

No mention or hint about tax rises in the Spending Review yesterday. Will now wait for further info/ rumours/leaks before taking some taxable capital gains.

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Re: Capital Gains Tax for Shares

#360307

Postby Lootman » November 26th, 2020, 2:59 pm

Parky wrote:No mention or hint about tax rises in the Spending Review yesterday. Will now wait for further info/ rumours/leaks before taking some taxable capital gains.

There was no mention of tax at all, as far as I could see. The focus was more on spending and the deficit. We can only hope that the Tory MPs are constantly reminding him which party he is in!

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Re: Capital Gains Tax for Shares

#360458

Postby Gengulphus » November 26th, 2020, 10:06 pm

Parky wrote:No mention or hint about tax rises in the Spending Review yesterday. Will now wait for further info/ rumours/leaks before taking some taxable capital gains.

Well, it was a Spending Review, not a Budget... Not saying that taxation changes are never mentioned, hinted at or even stated in Spending Reviews, but Budgets are the more usual place for them.

Gengulphus

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Re: Capital Gains Tax for Shares

#360513

Postby Parky » November 27th, 2020, 8:44 am

Gengulphus wrote:
Parky wrote:No mention or hint about tax rises in the Spending Review yesterday. Will now wait for further info/ rumours/leaks before taking some taxable capital gains.

Well, it was a Spending Review, not a Budget... Not saying that taxation changes are never mentioned, hinted at or even stated in Spending Reviews, but Budgets are the more usual place for them.

Gengulphus


But I thought there might be some hints to "soften us up" for the tax rises to come.

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Re: Capital Gains Tax for Shares

#376627

Postby Parky » January 13th, 2021, 3:26 pm

Have just taken about one third of my outstanding capital gains, so the chancellor will do very well from me this tax year even if he doesn't increase the CGT rate :(

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Re: Capital Gains Tax for Shares

#381170

Postby Pipsmum » January 27th, 2021, 11:26 am

I'm having real problems understanding the disposal rules order of tax return entries. I'm trying to fill in a self assessment form for capital gains.

I've read this thread carefully and I'm not in the league of all those of you with huge CGT bills, as all of my calcs are way, way below the allowance thresholds. However some of them are outside the ISA wrapper so presumably must go onto the form.

Single type share disposal is straightforward enough to understand, but when I've repeatedly bought and sold the same share over a longer period then..... i'm struggling a bit.

If I repeatedly traded the same shares within a period from 30/1/18 until the final sale on the 20/1/20 so two years worth (ten purchases and ten sales but not always the same quantities so not every one is a buy and sell all each time)...

Do I apply the rules in order of these by extracting those from the overall body as such:
1) same day rule... then
2) bed and breakfast rule.... then
3) all the rest as Section 104
or
Do the whole lot get sectioned as a 104?
or
Do I only work out the bit relevant to the 2019/20 tax year? (the last purchase was 24/10/18 but sold in 2020)

Overall it shows a loss anyway (with a straightforward primary school type addition and subtraction of obvious profit and loss) but I want to understand it for the future when things get more complex as I know they will be for the following years share dealings.

Do I even have to put the shares on it at all if they show a loss? Or do I need to register this loss for future tax returns?

Anyone feeling like being helpful? I've been working through the gov. worksheets and think I have just broken my brain.

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Re: Capital Gains Tax for Shares

#381175

Postby Arborbridge » January 27th, 2021, 11:36 am

Pipsmum wrote:I'm having real problems understanding the disposal rules order of tax return entries. I'm trying to fill in a self assessment form for capital gains.

I've read this thread carefully and I'm not in the league of all those of you with huge CGT bills, as all of my calcs are way, way below the allowance thresholds. However some of them are outside the ISA wrapper so presumably must go onto the form.

Single type share disposal is straightforward enough to understand, but when I've repeatedly bought and sold the same share over a longer period then..... i'm struggling a bit.

If I repeatedly traded the same shares within a period from 30/1/18 until the final sale on the 20/1/20 so two years worth (ten purchases and ten sales but not always the same quantities so not every one is a buy and sell all each time)...

Do I apply the rules in order of these by extracting those from the overall body as such:
1) same day rule... then
2) bed and breakfast rule.... then
3) all the rest as Section 104
or
Do the whole lot get sectioned as a 104?
or
Do I only work out the bit relevant to the 2019/20 tax year? (the last purchase was 24/10/18 but sold in 2020)

Overall it shows a loss anyway (with a straightforward primary school type addition and subtraction of obvious profit and loss) but I want to understand it for the future when things get more complex as I know they will be for the following years share dealings.

Do I even have to put the shares on it at all if they show a loss? Or do I need to register this loss for future tax returns?

Anyone feeling like being helpful? I've been working through the gov. worksheets and think I have just broken my brain.


Are these share transctions held in an online broker account? If so, they usually give a cost price and current value in different columns for the total holding of a share. I've never thought to ask my broker, but I wonder if these two values are what you would use to calculate the gain? Perhaps they have already calculated the applicable cost price for you.

Arb.

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Re: Capital Gains Tax for Shares

#381201

Postby Pipsmum » January 27th, 2021, 12:43 pm

Thank you. I'll have another look. I'm with HL.

I may have found the problem (one of them). I think one of the mathematical symbols must be wrong on the actual gov. website help sheet. Unless I'm just being a twit. I keep getting an erroneous £1 adding to all my calcs so no wonder nothing is working out correctly when I cross reference the figures to check my entries.

https://assets.publishing.service.gov.u ... ample3.pdf

On the first sheet under
Note on calculation
The fraction is given as Disposal proceeds/Disposal proceeds + value of shares not sold

Should this not be a x not a + because otherwise it keeps adding 1

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Re: Capital Gains Tax for Shares

#381202

Postby Alaric » January 27th, 2021, 12:56 pm

Pipsmum wrote:The fraction is given as Disposal proceeds/Disposal proceeds + value of shares not sold

Should this not be a x not a + because otherwise it keeps adding 1


Just a missing bracket I would have thought.
so
Disposal proceeds/(Disposal proceeds + value of shares not sold)

Example

Shares worth £ 10,000. You sell one quarter of them.
Disposal proceeds £ 2,500. Value of shares not sold £ 7,500.
Thus fraction is 1/4

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Re: Capital Gains Tax for Shares

#381207

Postby Charlottesquare » January 27th, 2021, 1:10 pm

Arborbridge wrote:
Pipsmum wrote:I'm having real problems understanding the disposal rules order of tax return entries. I'm trying to fill in a self assessment form for capital gains.

I've read this thread carefully and I'm not in the league of all those of you with huge CGT bills, as all of my calcs are way, way below the allowance thresholds. However some of them are outside the ISA wrapper so presumably must go onto the form.

Single type share disposal is straightforward enough to understand, but when I've repeatedly bought and sold the same share over a longer period then..... i'm struggling a bit.

If I repeatedly traded the same shares within a period from 30/1/18 until the final sale on the 20/1/20 so two years worth (ten purchases and ten sales but not always the same quantities so not every one is a buy and sell all each time)...

Do I apply the rules in order of these by extracting those from the overall body as such:
1) same day rule... then
2) bed and breakfast rule.... then
3) all the rest as Section 104
or
Do the whole lot get sectioned as a 104?
or
Do I only work out the bit relevant to the 2019/20 tax year? (the last purchase was 24/10/18 but sold in 2020)

Overall it shows a loss anyway (with a straightforward primary school type addition and subtraction of obvious profit and loss) but I want to understand it for the future when things get more complex as I know they will be for the following years share dealings.

Do I even have to put the shares on it at all if they show a loss? Or do I need to register this loss for future tax returns?

Anyone feeling like being helpful? I've been working through the gov. worksheets and think I have just broken my brain.


Are these share transctions held in an online broker account? If so, they usually give a cost price and current value in different columns for the total holding of a share. I've never thought to ask my broker, but I wonder if these two values are what you would use to calculate the gain? Perhaps they have already calculated the applicable cost price for you.

Arb.


HL do not appear to do matching per CGT rules, they use averages(in effect pool calculations)

The way I used to do multiple sales/purchases was first stick all the sales and dates on a spreadsheet in a couple of columns, marry up any same day purchases in other columns alongside (number/date/cost), next marry the subsequent purchases within 30 days and then throw the rest into a pool calculation to calculate the pool figures.

Re the question, were there sales in the earlier tax years since 2018? If so how were these calculated/ reported if they were required to be reported? If losses not claimed then amending 2018/2019 is urgent (31st January deadline re in time revision)

Page 5 of attached sets out matching order with some examples
http://www.audley-training.co.uk/wp-con ... -Rules.pdf


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