how much tax will I pay on my sold shares

drive007

I have currently have some shares which are worth £42.5K, and purchased for £20K five years ago. After all duties paid out on selling them, I estimate about £22K clear profit.
I am a basic rate tax payer.

How much tax would I need to pay on this £22K profit ? or would it be better to sell them a bit at a time to keep it under the CGT limit !

Thanks

MJSW

Assuming they are non-business assets, you would get 15% taper relief if you have held them at least 5 years, reducing the gain to £18,700. Annual exemption is £8,200 in the current tax year, so you would be taxable on around £10,500 (assuming you have no other gains or losses in this tax year, or losses brought forward from earlier tax years).

For a basic rate tax payer, tax on gains is at 20%, so you would pay £2,100 in tax. Bear in mind though that if the £10,500 carries you into the higher rate tax band, then only some of the gains would be charged at 20%, and the excess would be at 40%.

In may be an idea to split the disposal into different tax years, and that way you get two years annual exemptions. If you sell half this year, and the other half on or after 6 April 2005, then the total gain after exemption drops to around £2,300, and the tax liability to £460. The risk of doing this is of course that the price could drop between now and 6 April, which could potentially cost you more than the £1,640 tax saving. Equally, they may also go up instead.

NB If these are shares in your employer, or in an unquoted trading company (which includes AIM and OFEX shares), then you will get much more generous taper relief, and the gains would probably fall completely within your annual exmeption, meaning you may have no tax to pay at all. If you think that may be the case then get back to me with some further information.