Tax on shares

Robster88

I put some money into shares for the first time last week and so am pretty new to all this so forgive my ignorance, but have a question regarding any capital gains tax I may have to pay when I come to sell.

I have so far made about £9000 profit, with the total value of the shares now being around £19,000. If I sold them all my profit would be under the capital gains allowance of £10,100 but the total value of the shares would be over. How would the tax man know how much profit I have made (and therefore if I need to pay capital gains tax) without knowing the price I paid for them, or will they know somehow?

Thanks in advance...

C_Mababejive

Could you share your share dealing secrets with us please?

Loughton_Monkey

My understanting is you don't have to declare capital gains below the £10.1K limit. But Mr Taxman relies on your honesty. But he probably has 'ways' to discover if you may be a little bit economical with the truth.

xrjtg

HMRC agrees (provided the total sales are under £40400).

cheerfulcat

Robster88 wrote: »

How would the tax man know how much profit I have made (and therefore if I need to pay capital gains tax) without knowing the price I paid for them, or will they know somehow?

Thanks in advance...

The taxman would know the price you paid because you will have told him when completing the CGT portion of a tax return as you are required to do if you have a CGT liability.

longwalks1

please dooooooooooooooooooooooooo share your trading secrets

Robster88

Thanks for all the replies.

Sounds like I won't have to declare anything then unless I make a bit more profit. I'm surprised the system relies on this much honesty. I'm hoping to hold onto the shares for a while longer, and will hopefully make more profit so may be over the capital gains threshold at some point in the future. I've never had to fill in a tax return before (I'm still a student) - would I have to ask for one or would I get sent one automatically? (Yes I'm afraid I really am this naive about these matters!)

C_Mababejive wrote: »

Could you share your share dealing secrets with us please?

£9,000 profit in a week is pretty good so I'm quite pleased about that but I don't have any share dealing secrets I'm afraid - like I said i've never bought or sold shares before), so I think i'll put it down to beginners luck.

cheerfulcat

Hi, Robster,

You'd have to ask for the CGT pages of the tax return if you made more than the CGT allowance.

Yes, the system does rely on individuals being honest but as Loughton Monkey implies, the taxman has ways of knowing your dealings.

You might like to think about putting the shares into an ISA to avoid CGT.

Loughton_Monkey

Robster88 wrote: »

I've never had to fill in a tax return before (I'm still a student) - would I have to ask for one or would I get sent one automatically? (Yes I'm afraid I really am this naive about these matters!)

But you've been told that you don't need to tell the taxman if you have made £10,100 or less. [and have not sold assets totalling £40,400].

Also, you do not need to make more than £10,100 profit this tax year, however well your shares continue to grow.

This is an aspect you really need to bone up about. Without any other major influences, you would deliberately sell only enough of your shares to get 'just below' the limit in one tax year. Sell the remainder the following tax year, when you get another allowance.

WHITEVANMAN

cheerfulcat wrote: »

Hi, Robster,

You'd have to ask for the CGT pages of the tax return if you made more than the CGT allowance.

Yes, the system does rely on individuals being honest but as Loughton Monkey implies, the taxman has ways of knowing your dealings.

You might like to think about putting the shares into an ISA to avoid CGT.

Payments into bank accounts over certain amounts are flagged up in banking systems, HMRC have the ability to see these flags if they should so choose

Robster88

Loughton_Monkey wrote: »

But you've been told that you don't need to tell the taxman if you have made £10,100 or less. [and have not sold assets totalling £40,400].

Also, you do not need to make more than £10,100 profit this tax year, however well your shares continue to grow.

This is an aspect you really need to bone up about. Without any other major influences, you would deliberately sell only enough of your shares to get 'just below' the limit in one tax year. Sell the remainder the following tax year, when you get another allowance.

Yes I am now aware I wouldn't need to tell the tax man if I made less the capital gains allowance, but yea you're quite right that it would be foolish to sell above the limit when I could just sell them on either side of the tax year. I didn't really see this as a long term investment, just a quick couple of week turnaround, but yes it would be worth keeping them long enough to sell them over a couple of years IF they do take me over the limit, or I could cut and run now.