selling shares

Phaelok

Hi all,

I have been asked to post this on behalf of my father who does not use this site and as I do not know the answer to his question directly, I was hoping that someone could advise or at least point me in the direction of someone who can.

Several years ago my father purchased a substantial amount of shares in a company which is doing well. He is considering cashing the shares in and has worked out the approximate value to be around £90k. He has not cashed shares before, but as I understand it he would be liable to pay capital gains tax on a porportion of that amount. Therefore can someone please advise...

What is the percentage of the capital gains tax? or how much could he cash in without paying tax?

Would it be possible to transfer shares in several people's names (e.g. myself) and cash them in that way so as to avoid tax? (presumably it is not illegal to do this?)

Many thanks for any help you can offer.

Biggles

To transfer them to anyone else (except his wife) would be a disposal for CGT purposes, so nothing would be gained by it.

How much is his gain (ie how much did the shares cost?).

Phaelok

He bought the shares at 38p and are now worth just over £3.84. I just checked with my father and he states this was in fact 6-7 years ago.

Phaelok

Phaelok wrote: »

He bought the shares at 38p and are now worth just over £3.84. I just checked with my father and he states this was in fact 6-7 years ago.

*that be bought them I mean, sorry*

MarkFromCornwall

Phaelok wrote: »

Hi all,
Would it be possible to transfer shares in several people's names (e.g. myself) and cash them in that way so as to avoid tax? (presumably it is not illegal to do this?)

Many thanks for any help you can offer.

I'm not sure of the exact answers to your questions, but if you sell some now and some in future years you can avoid paying capital gains tax if you keep your profits below a certain limit (about £10000 per year).

opinions4u

Phaelok wrote: »

I was hoping that someone could advise or at least point me in the direction of someone who can.

I don't claim expertise on the subject, so suggest you read up on the detail in this link. My suggested answers below are my understanding of current rules, but verify it before you act!

Several years ago my father purchased a substantial amount of shares in a company which is doing well. He is considering cashing the shares in and has worked out the approximate value to be around £90k. He has not cashed shares before, but as I understand it he would be liable to pay capital gains tax on a porportion of that amount. Therefore can someone please advise...

Any gain over the personal allowance (£10,100) is subject to CGT.

What is the percentage of the capital gains tax?

18%.

or how much could he cash in without paying tax?

He can make a capital gain of £10,100 a year without paying tax.

Would it be possible to transfer shares in several people's names (e.g. myself) and cash them in that way so as to avoid tax? (presumably it is not illegal to do this?)

Spouse only.

If you estimate his gains at £80k he could, in order to reduce the CGT liability to nil, transfer half his holding to a spouse.

Each could sell some of the holding, making a capital gain not in excess of £10,100.

A further sale within CGT thresholds could be made by each at the start of each tax year for the following 3 years.

This of course runs the risk of CGT rates changing unfavourably, share values falling etc etc. Equally, there is a potential upside of CGT rates changing for the better or the share values rising further.

Any shares held within a stocks and shares ISA would be exempt from CGT.

If he plans to reinvest, an IFA may be able to advise him more throughly. Alternatively, it may be worth approaching an appropriately qualified accountant who could also advise.

Phaelok

opinions4u wrote: »

I don't claim expertise on the subject, so suggest you read up on the detail in this link. My suggested answers below are my understanding of current rules, but verify it before you act!

Any gain over the personal allowance (£10,100) is subject to CGT.

18%.

He can make a capital gain of £10,100 a year without paying tax.

Spouse only.

If you estimate his gains at £80k he could, in order to reduce the CGT liability to nil, transfer half his holding to a spouse.

Each could sell some of the holding, making a capital gain not in excess of £10,100.

A further sale within CGT thresholds could be made by each at the start of each tax year for the following 3 years.

This of course runs the risk of CGT rates changing unfavourably, share values falling etc etc. Equally, there is a potential upside of CGT rates changing for the better or the share values rising further.

Any shares held within a stocks and shares ISA would be exempt from CGT.

If he plans to reinvest, an IFA may be able to advise him more throughly. Alternatively, it may be worth approaching an appropriately qualified accountant who could also advise.

Many thanks for your help. I will pass the information onto him.

ses6jwg

Excellent gain, what was the company, purely out of interest?

Richard_DandR

Opinions4u has set out the way to avoid CGT.

However, your Father will continue to have investment risk untill the last batch is sold.

If he has a gain of approx £80,000, the CGT would be around £12,600 (80,000 less allowance of 10,100 = 69,900 at 18%) if the whole lot was sold immediately. Transferring half the holding to spouse and then selling the lot brings in a second CGT allowance into play and would mean Father and spouse would each have a liability of approx £5,400, a total of £10,800.

I had some shares in 200/01 which had a reasonable gain. they were on the up and reached £18. I held on as there would be a CGT liability and hoped to sell half in one tax year and the balance the next. The share price resolved the CGT issue by falling steadily. I think they went below £2. I got out early at around £12 so still made a profit.

Moral is not to let the tax position dictate your investment decision. Better to take the profit and pay the tax than to have no profit at all.