Selling shares to keep within the new threshold

[Fluke]

I've not had to think about CGT before when selling shares to transfer to my ISA but will have to this year. I have a holding of Diageo in my unsheltered HL account with a value of about £17,000, this includes a gain of around 65%. How much of it can I sell so that I don't trouble the CG tax man this year? I'm thinking around £9200 which would keep the capital gain part to just under £6000 or 65%. Or doesn't it work like that?

[Dod101]

I've not had to think about CGT before when selling shares to transfer to my ISA but will have to this year. I have a holding of Diageo in my unsheltered HL account with a value of about £17,000, this includes a gain of around 65%. How much of it can I sell so that I don't trouble the CG tax man this year? I'm thinking around £9200 which would keep the capital gain part to just under £6000 or 65%. Or doesn't it work like that?

I wrestled with that myself with Unilever and the thread is somewhere. If you keep the gain within £6,000 you will be fine I think. The thing is though are you able to top up this year's £20,000 from other sources? If not you might be as well to take the hit because next year the allowance drops to £3,000.

Dod

[mc2fool]

I've not had to think about CGT before when selling shares to transfer to my ISA but will have to this year. I have a holding of Diageo in my unsheltered HL account with a value of about £17,000, this includes a gain of around 65%. How much of it can I sell so that I don't trouble the CG tax man this year? I'm thinking around £9200 which would keep the capital gain part to just under £6000 or 65%. Or doesn't it work like that?

So you acquired the holding for ~£10300, yes?

£6000 / 0.65 = £9230.77, so, yeah, that's about right.

[88V8]

I've not had to think about CGT before when selling shares to transfer to my ISA but will have to this year. I have a holding of Diageo in my unsheltered HL account with a value of about £17,000, this includes a gain of around 65%. How much of it can I sell so that I don't trouble the CG tax man this year? I'm thinking around £9200 which would keep the capital gain part to just under £6000 or 65%. Or doesn't it work like that?

Yes, like that.
Although if you have losses that you're happy to crystallise, you can offset them of course.

V8

[AJC5001]

I've not had to think about CGT before when selling shares to transfer to my ISA but will have to this year. I have a holding of Diageo in my unsheltered HL account with a value of about £17,000, this includes a gain of around 65%. How much of it can I sell so that I don't trouble the CG tax man this year? I'm thinking around £9200 which would keep the capital gain part to just under £6000 or 65%. Or doesn't it work like that?

So you acquired the holding for ~£10300, yes?

£6000 / 0.65 = £9230.77, so, yeah, that's about right.

If the holding is worth £17,000 and the gain is 65%, then the gain is 17000*0.65 = £11,050 and the original cost is £5,950, isn't it?

I'd agree that selling £9,200 should be safe, assuming no other CGT transactions this tax year (including any in the future).

I also agree with Dod that you need to consider what you will do in the next tax year when the CGT allowance will be £3,000 as you won't be able to get rid of the remaining Diageo shares at their current valuation without CGT then.

Adrian

[mc2fool]

So you acquired the holding for ~£10300, yes?

£6000 / 0.65 = £9230.77, so, yeah, that's about right.

If the holding is worth £17,000 and the gain is 65%, then the gain is 17000*0.65 = £11,050 and the original cost is £5,950, isn't it?

A gain of 65% doesn't mean that 65% of the value is gain!

Think of it with more blatant numbers: if the gain had been 100% (i.e. it had doubled) what would the £ gain and original cost have been by your method?

P.S. the calculation is £17000 / 1.65 = £10303.

[Fluke]

Well to be precise and to use the current price which is slightly different to this morning, the cost was £5,987 the current value is £16,551 making the gain £10,564 which is about 64% by my calculations.

But I don't need to explore Mc2fool's "A gain of 65% doesn't mean that 65% of the value is gain!" head scratcher, because XXV8 has come to the rescue. For some years I have been dutifully carrying forward a £16k capital loss on my SA in respect of my ill-fated investment in Carillian, this had completely escaped my mind!

So I can now sell the lot in one go from my unsheltered account, put some of the cash into the ISA to add to the cash already there and re-buy the Diageo shares there, thus solving the problem.

My next question will be, but I might save it til next April/May when I'm doing my SA, how do I declare all this so that I don't incur any CPT AND retain the remainder of the Carillion capital loss (about £6k) for the following year when I'm bound to need it again?

[mc2fool]

Well to be precise and to use the current price which is slightly different to this morning, the cost was £5,987 the current value is £16,551 making the gain £10,564 which is about 64% by my calculations.

The value of your holding has almost tripled, at 2.76 times your cost, and you think the gain is just 64%?!?

Gains are measured over the cost price, not over the end value. ((£16,551 / £5,987) - 1) * 100 = 176.45%

Or if you prefer ((£16,551 - £5,987) / £5,987) * 100 = 176.45%.

By your thinking you can never have a gain of more that 100% because the gain would be the entire holding!

If you don't believe me read https://www.investopedia.com/ask/answers/how-do-you-calculate-percentage-gain-or-loss-investment/

[Fluke]

Well to be precise and to use the current price which is slightly different to this morning, the cost was £5,987 the current value is £16,551 making the gain £10,564 which is about 64% by my calculations.

The value of your holding has almost tripled, at 2.76 times your cost, and you think the gain is just 64%?!?

Gains are measured over the cost price, not over the end value. ((£16,551 / £5,987) - 1) * 100 = 176.45%

Or if you prefer ((£16,551 - £5,987) / £5,987) * 100 = 176.45%.

By your thinking you can never have a gain of more that 100% because the gain would be the entire holding!

If you don't believe me read https://www.investopedia.com/ask/answers/how-do-you-calculate-percentage-gain-or-loss-investment/

Ah see what you mean. Okay well going back to the original question, if I did want to sell just enough to as not to exceed the £6000 CG threshold, how much would I need to sell?

[mc2fool]

The value of your holding has almost tripled, at 2.76 times your cost, and you think the gain is just 64%?!?

Gains are measured over the cost price, not over the end value. ((£16,551 / £5,987) - 1) * 100 = 176.45%

Or if you prefer ((£16,551 - £5,987) / £5,987) * 100 = 176.45%.

By your thinking you can never have a gain of more that 100% because the gain would be the entire holding!

If you don't believe me read https://www.investopedia.com/ask/answers/how-do-you-calculate-percentage-gain-or-loss-investment/

Ah see what you mean. Okay well going back to the original question, if I did want to sell just enough to as not to exceed the £6000 CG threshold, how much would I need to sell?

£6,000 * £16,551 / (£16,551 - £5,987) = £9,400.41

[Lootman]

Ah see what you mean. Okay well going back to the original question, if I did want to sell just enough to as not to exceed the £6000 CG threshold, how much would I need to sell?

£6,000 * £16,551 / (£16,551 - £5,987) = £9,400.41

There is nothing wrong with paying a little CGT (at only 10% for a basic-rate taxpayer and never more than 20%) just to ensure that you fully utilise your annual CGT-free allowance without having to do such computations down to the last penny.

[Fluke]

£6,000 * £16,551 / (£16,551 - £5,987) = £9,400.41

There is nothing wrong with paying a little CGT (at only 10% for a basic-rate taxpayer and never more than 20%) just to ensure that you fully utilise your annual CGT-free allowance without having to do such computations down to the last penny.

Yes agreed but I was curious to know how you work it out, Mc2fool has provided the answer. I wasn't far off with my initial stab. I mentioned earlier though, I have an existing loss that I had completely forgotten I can use to offset any gain, I never really thought I'd ever use it but the decrease in thresholds has changed that.

[mutantpoodle]

or more simply

you know what the cost of each share was
you can see what you can sell each share for

take the difference and divide the CGT allowance of £6000 by that amount

aside from selling costs thats the number you can sell

iF you are 'bed and ISA ing...make sure all costs are allocated to the 'sell', as thats allowable against CGT

[Fluke]

iF you are 'bed and ISA ing...make sure all costs are allocated to the 'sell', as thats allowable against CGT

Last time I looked HL had suspended its bed and isa service although it may have been reinstated now, I'll check, but the dealing charges were always on the repurchase, the sell was free.

[Fluke]

iF you are 'bed and ISA ing...make sure all costs are allocated to the 'sell', as thats allowable against CGT

Last time I looked HL had suspended its bed and isa service although it may have been reinstated now, I'll check, but the dealing charges were always on the repurchase, the sell was free.

update: It's reinstated

[daveh]

£6,000 * £16,551 / (£16,551 - £5,987) = £9,400.41

There is nothing wrong with paying a little CGT (at only 10% for a basic-rate taxpayer and never more than 20%) just to ensure that you fully utilise your annual CGT-free allowance without having to do such computations down to the last penny.

But if you don't normally do a tax return and keep the net gain within the CGT allowance and don't sell in total more than what used to be 4x the allowance but is I now think £50k then you don't need to inform HMRC, so in that situation (which is my situation) it's well worth doing the calculation carefully so you stay within the CGT allowance and keep out of the clutches of HMRC.