(How Much) Do you get taxed upon withdrawing stocks & shares?

Legacy_user

A few years ago I invested a small amount in the stock exchange through a broker service, just to familiarize myself with investments. I reinvested all my dividends.

I am now thinking of withdrawing all my investment (+profits) as I need the money to pay the bills.

Question is, do I get taxed on my profits? If so how much? How is it calculated?

CLAPTON

you work out the gain i.e. net selling income less buying costs

then you have £9,600 CGT allowance .. if lthe gain is less than that then no tax but if above you pay 18% on the (annual) gain above 9,600.

System

Thank you for the fast reply clapton, it's much appreciated!

Is it £9600 profit per year even if you do not sell the shares? Or upon point of selling the shares?

i.e. if in year 1 I made £5000 profit and in year 2 I made £6000 profit, and I withdrew the £11,000 profits from the investment account in year 3 would I be taxed because it is above the £9,600 threshold? Or would it count as two separate years of profit and therefore not get taxed?

opinions4u

candyflossing wrote: »

Thank you for the fast reply clapton, it's much appreciated!

Is it £9600 profit per year even if you do not sell the shares? Or upon point of selling the shares?

i.e. if in year 1 I made £5000 profit and in year 2 I made £6000 profit, and I withdrew the £11,000 profits from the investment account in year 3 would I be taxed because it is above the £9,600 threshold? Or would it count as two separate years of profit and therefore not get taxed?

It's the point at which you crystalise your gains that counts. They used to allow you to offset inflation - don't think that has changed, but I'm sure other posters will confirm one way or the other.

£12,000 profit - £9,600 threshold = £2,400 liable for tax x 18% = £432 tax

If , for example, you have held the investments for 5 years and indexation is 15% (theoretical, 5 yrs inflation at 3% guess) and the indexation rules weren't scrapped by Mr Darling you could reduce the value of your gain by £1,800.

£12,000 - £1,800 - £9,600 = £600 x 18% = £108 tax.

Hope that makes sense.

dkmax_2

candyflossing wrote: »

Is it £9600 profit per year even if you do not sell the shares?

A capital gain is not realised until the asset is sold. This goes for shares as it does for a house, car, stamp collection or a tin of baked beans. Otherwise it is just a 'paper profit' which may give you a warm and fuzzy feeling, but it can't be taxed nor spent.

One can crystalise gains every year by selling your shares and buying them back - but this costs money and may expose you to a small amount of risk. This way you actually make use of your annual CG allowance but it clearly needs to be worthwhile.

cheerfulcat

candyflossing wrote:

A few years ago I invested a small amount in the stock exchange through a broker service, just to familiarize myself with investments. I reinvested all my dividends.

I am now thinking of withdrawing all my investment (+profits) as I need the money to pay the bills.

Question is, do I get taxed on my profits? If so how much? How is it calculated?

The calculation is proceeds of sale minus costs of purchase ( including re-invested dividends, which can get quite messy....) by 18%, if the result is greater than £9600.

opinions4u wrote: »

If , for example, you have held the investments for 5 years and indexation is 15% (theoretical, 5 yrs inflation at 3% guess) and the indexation rules weren't scrapped by Mr Darling you could reduce the value of your gain by £1,800.

Indexation was scrapped by Gordon Brown in 1997. He introduced the less favourable taper relief, which was itself abolished in the last Budget. So tax is paid on the full nominal gain, regardless of inflation.

System

Thank you for the help, I've done an internet seach, & I downloaded the 'calculating your CGT' doc from yougov. (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnSavingsAndInvestments/DG_10013733)

As I have done this through a brokers investment account (he does all the buying/selling for me), and am reinvesting all my dividends, I guess I'll have to go through all the papers and calculate exactly what has been bought/sold & when.