CGT management in the final weeks of a tax year

[Itsallaguess]

‎
Whilst being very good at enacting a long-term buy-and-hold approach to my investments, I do take a slightly more active-management approach with my unsheltered (non-ISA) shares account when it comes to Capital Gains Tax, and as we're coming into the final few weeks of this tax-year, this is a good chance to remind ourselves that there may still be opportunities to take advantage of unused CGT allowances where they might still be available.

I've got a fairly chunky holding in my unsheltered account that I'm looking to unwind into one of my shares-ISA accounts over the coming years, and with not yet having made any sales at all from that non-ISA account, this is the time of year that I will start to make notes with regards to the timing and scale of any remaining 2024/25 sales, by which to take as full an advantage of my £3000 CGT allowance for this tax year as possible.

With CGT allowances having been around the £12,000 mark for many years, and then dropping to £6000 for 2023/24 and now down to £3000 for 2024/25 and also next year, it's important to take advantage of the relatively low tax-free allowances that we have left, and especially where even these current lower CGT levels might yet drop further.

This could potentially be an important period of the current tax year if anyone is yet to consider how they might yet take full advantage of any remaining CGT allowance that they might have.

Cheers,

Itsallaguess

[monabri]

I sold a property this tax year and there was a significant capital gain. I sold my loss making "China" ITs (BGCG, JCGI) and rebought in my wife's general trading account and our ISAs using accrued dividends. I will be declaring a loss on the shares sold.

[Urbandreamer]

Can I add a rider to Itsallaguess point.

Depending upon what you have, don't wait until now to consider CGT. If you do, you can easily wind up with a tax bill.

Monabri, seems to me to provide an example where remedial action had to be taken.

For years I had no need to consider CGT, that is no longer the case, though it's still easy for me to stay under the limit. The point is that I do need to consider it.

[SalvorHardin]

One thing about paying CGT is that once you get used to doing it, it doesn't hurt as much. Having paid CGT in almost every tax year this century, I'm very used to it and am still in the fortunate position of having a very large CGT liability on my shareholdings. By fortunate I mean that it's far better to have the gains than to not have them.

I'd rather not have the tax liability, but my solicitor friend reckons that my claim to identify as a "non taxpayer" wouldn't stand up in court

As an accountant I knew a long time ago said, "60% of something is far better than 100% of nothing". This related to a case we heard about where someone had a massive gain in a single company and refused to sell any shares because they didn't want to pay CGT even though the holding formed the majority of their net worth. Then the company went bust overnight. At least they no longer had to worry about the CGT liability.

Harold Macmillian said that the greatest challenge for a statesman was "Events dear boy, events". The same goes for investors IMHO. There I was last month having made all of my sales for 2024-25 which resulted in no CGT liability. Then a couple of week ago things started to go a bit crazy, with serious questions beng raised about some of the American economy (the on-off tariffs have been playing havoc with some companies, as has serious doubts about American defence companies because of the risk that America is now much keener to impose restrictions on the use of weapons sold overseas, which will play havoc with demand).

So I've been selling some of my American holdings (particularly defence companies), which has resulted in a moderately large CGT bill when I thought I wasn't going to be paying anything for 2024-25. Unfortunately I had used up my capital losses which were crystallised three to four months ago when I sold the bulk of my British focused holdings. Oh well...

[DrFfybes]

In the past I've waited until the last month, this time I did it just before the budget. taking gains that take us both to bordering the Higher Rate tax band. I sold one product and MrsF rebought it, and Vice Versa.

As it happens, it was a wise move. Had rates not nearly doubled then it would have made little difference. My gains were way above the current Allowance, had markets risen I'd simply have brought gains forwards. Had markets dropped I could have done the same exercise to crystallise a loss and reduce the gains bill.

As it stand the Global tracker is about 3.34% up since then, BRKB moreso I think.

One thing about paying CGT is that once you get used to doing it, it doesn't hurt as much

Agreed - circa £4k tax bill on about £46k of realised gains probably isn't too bad, especially as I didn't have to get off my bum and do anything to make it either.

Paul

[monabri]

Agreed - circa £4k tax bill on about £46k of realised gains probably isn't too bad, especially as I didn't have to get off my bum and do anything to make it either.

Paul

You've done well to get your tax bill down to £4k. I would have thought ( income from all sources + £46k gains on top) would have pushed part of your bill into the higher rate tax bracket.

[DrFfybes]

Agreed - circa £4k tax bill on about £46k of realised gains probably isn't too bad, especially as I didn't have to get off my bum and do anything to make it either.

Paul

You've done well to get your tax bill down to £4k. I would have thought ( income from all sources + £46k gains on top) would have pushed part of your bill into the higher rate tax bracket.

Yes, but it is mainly "realised gains", not "Income" My strategy was to buy low/zero dividend payers and sell down for 'spending money' which made sense when CGT allowances were more generous.

Taxable income is circa £6k, plus dividends, ERI, and interest takes me to about £12-14k, nearer £11k excluding interest. £42k in Gains for me, means it should mainly be in the 10% bracket AIUI. Tax might actually be nearer £5k looking at it although I could get rid of NESF to reduce it. I could have shuffled it so as not to go over the threshold, but to be honest as a percntage of the total the excession of the limit is minor.

Gain of circa £4k for MrsF, so probably £100 in CGT as she already knocks on the Higher rate tax.

Paul

[monabri]

You've done well to get your tax bill down to £4k. I would have thought ( income from all sources + £46k gains on top) would have pushed part of your bill into the higher rate tax bracket.

Yes, but it is mainly "realised gains", not "Income" My strategy was to buy low/zero dividend payers and sell down for 'spending money' which made sense when CGT allowances were more generous.

Taxable income is circa £6k, plus dividends, ERI, and interest takes me to about £12-14k, nearer £11k excluding interest. £42k in Gains for me, means it should mainly be in the 10% bracket AIUI. Tax might actually be nearer £5k looking at it although I could get rid of NESF to reduce it. I could have shuffled it so as not to go over the threshold, but to be honest as a percntage of the total the excession of the limit is minor.

Gain of circa £4k for MrsF, so probably £100 in CGT as she already knocks on the Higher rate tax.

Paul

I was wondering if one should add the £12k/£14k figure to the £42k which then moves you above £50270. Working on an average of £13k + £42k = £55k, wouldn't you be 'exposed to the higher rate of capital gains tax on ~£5k?

I ask/ seek confirmation because I'm in a similar position.

[Lootman]

For 24/25 I did all my sales back last May anticipating both a Labour election win and CGT rates going up part way through the tax year. Bettefr to pay 10% and 20% CGT rather than (as it turned out) 18% and 24%. So nothing to do now until April 6th.

Like Salvor I have large unrealised capital gains but am not afraid to pay some CGT as it is under my control, and rates are still relatively benign. I was worried that RR might equalise CGT and income tax rates, which would have probably prompted me to become non-resident as (under current rules) that avoids UK CGT altogether.

I pay a lot more CGT than any other tax.

[londoninvestor]

I was wondering if one should add the £12k/£14k figure to the £42k which then moves you above £50270. Working on an average of £13k + £42k = £55k, wouldn't you be 'exposed to the higher rate of capital gains tax on ~£5k?

I ask/ seek confirmation because I'm in a similar position.

You have a basic rate band of £37700 (though that can be increased by pension contributions).

If your income (net of personal allowance) and gains (net of £3k annual exemption) combined fit into that band, then you have no higher rate CGT to pay.

The idea of a £50270 limit (i.e. £37700 plus the £12570 personal allowance) for higher rate CGT is a bit of a simplification that's true only if your income exceeds the personal allowance, In that case, the point where your (income + gains - 3k annual exemption) hits £50270 is indeed the point where higher rate CGT kicks in.

However, unused personal allowance doesn't mitigate any CGT. So say you have zero income, and £45k in total gains: then you pay no CGT on the exempt £3k, the lower rate of CGT on the £37700 of gains, and the higher rate on the remaining £4300 of gains.

[DrFfybes]

.....
However, unused personal allowance doesn't mitigate any CGT. So say you have zero income, and £45k in total gains: then you pay no CGT on the exempt £3k, the lower rate of CGT on the £37700 of gains, and the higher rate on the remaining £4300 of gains.

That's how I understood it, a max of £40770 at 10% so I pay 20% on the top £1200. As I expected the CGT rates to align with IT then going over was fine as higher rate pre budget would be the same as the basic rate post budget. As it happened there is a 2% difference.

Similarly although my £3600 SIPP contribution raises the higher band threshold for IT, I don't think it impacts on my CGT maximum of £37700 at the lower rate?

Payl

[mike]

.....
However, unused personal allowance doesn't mitigate any CGT. So say you have zero income, and £45k in total gains: then you pay no CGT on the exempt £3k, the lower rate of CGT on the £37700 of gains, and the higher rate on the remaining £4300 of gains.

That's how I understood it, a max of £40770 at 10% 18% so I pay 20% 24% on the top £1200. As I expected the CGT rates to align with IT then going over was fine as higher rate pre budget would be the same as the basic rate post budget. As it happened there is a 2% difference.

Similarly although my £3600 SIPP contribution raises the higher band threshold for IT, I don't think it impacts on my CGT maximum of £37700 at the lower rate?

Payl

The November budget changed those rates as indicated above, although as I understand it, only on sales from then onwards, including any transactions on Budget Day itself.

[DrFfybes]

That's how I understood it, a max of £40770 at 10% 18% so I pay 20% 24% on the top £1200. As I expected the CGT rates to align with IT then going over was fine as higher rate pre budget would be the same as the basic rate post budget. As it happened there is a 2% difference.

Similarly although my £3600 SIPP contribution raises the higher band threshold for IT, I don't think it impacts on my CGT maximum of £37700 at the lower rate?

Payl

The November budget changed those rates as indicated above, although as I understand it, only on sales from then onwards, including any transactions on Budget Day itself.

I sold the week before the budget in anticipation of the increases.

Paul

[Harry23]

‎ I've got a fairly chunky holding in my unsheltered account that I'm looking to unwind into one of my shares-ISA accounts over the coming years,

I am likewise in a position of transferring some investments from an unsheltered account to my ISA and started this thread to ask how to calculate the maximum amount of sales to stay within the CGT allowance.

viewtopic.php?f=49&t=45675

[londoninvestor]

Similarly although my £3600 SIPP contribution raises the higher band threshold for IT, I don't think it impacts on my CGT maximum of £37700 at the lower rate?

It does! It widens your basic rate band to £41300 - which in your circumstances should mean you pay less CGT.

[DrFfybes]

Similarly although my £3600 SIPP contribution raises the higher band threshold for IT, I don't think it impacts on my CGT maximum of £37700 at the lower rate?

It does! It widens your basic rate band to £41300 - which in your circumstances should mean you pay less CGT.

Hoorah, that's another 10% saved on the contributions. I'd best top up to the full amount as I stopped at the budget once they weren't IHT exempt

Paul

[AJC5001]

I was wondering if one should add the £12k/£14k figure to the £42k which then moves you above £50270. Working on an average of £13k + £42k = £55k, wouldn't you be 'exposed to the higher rate of capital gains tax on ~£5k?

I ask/ seek confirmation because I'm in a similar position.

You have a basic rate band of £37700 (though that can be increased by pension contributions).

If your income (net of personal allowance) and gains (net of £3k annual exemption) combined fit into that band, then you have no higher rate CGT to pay.

The idea of a £50270 limit (i.e. £37700 plus the £12570 personal allowance) for higher rate CGT is a bit of a simplification that's true only if your income exceeds the personal allowance, In that case, the point where your (income + gains - 3k annual exemption) hits £50270 is indeed the point where higher rate CGT kicks in.

However, unused personal allowance doesn't mitigate any CGT. So say you have zero income, and £45k in total gains: then you pay no CGT on the exempt £3k, the lower rate of CGT on the £37700 of gains, and the higher rate on the remaining £4300 of gains.

The Scottish Income Tax Higher Rate of 42% starts at £43,663. Does this affect CGT rates for those of us north of the border?

(Doesn't affect me personally as my S&S investments are all in ISAs and SIPPs although I often look at my losses (Lloyds, anyone?) and think about claiming losses )

Adrian

[londoninvestor]

The Scottish Income Tax Higher Rate of 42% starts at £43,663. Does this affect CGT rates for those of us north of the border?

No - the CGT legislation says that any Scottish and Welsh changes to tax bands don't affect the calculation. So your basic rate band for CGT purposes is still £37700.