The way to avoid share dealing tax.

Inf0war

Hi,

am researching in to legally avoiding share dealing income tax. I know that up to £7000 or so there is no tax on porfits from shares. However once going over that what are the best off shore dealers to avoide tax on profits from shares?

Also what is the best share dealer for under 7k dealing?

regards

dunstonh

I'm going to assume you mean Capital Gains tax and not income tax as that is the only tax that you would normally be concerned with when sharedealing.

It is not £7000 but £8200. Plus its the gain that is taxable not the sale value. If you bought £10k of shares and they are now worth 15k, you could sell them with no tax liability. If the gain had gone over £8200 and you sold them, then you pay tax on the chargeable amount of the gain only. It is also your total realised gain in the tax year that applies not an individual holding.

You can sell some either side of the tax year giving you £16400 (likely to be a little higher due to tax year increase but dont have tax facts to hand to confirm).

You can transfer some of the shares to your spouse to utilise her allowances.

Or you can buy shares in an ISA (see following).

If you do mean income tax, then it is the dividend income that is taxable and dealing has nothing to do with that as such. That is where you can use your 7k ISA allowance with a self select ISA. Offshore investments wouldnt avoid the tax. It just deals with it over a different timescale and in a different manner. It can be beneficial to some and not others. However, my knowledge of individual shares and if they have the ability to be held offshore is virtually non existent.

cheerfulcat

Hi,

I too am assuming that you mean Capital Gains Tax, rather than income tax or stamp duty. The best way to avoid it is to use your CGT allowance every year, taking any profit up to the limit. If you don't want to sell out of a share completely, you can bed-and-ISA or bed-and-spouse it, which means selling & buying back either in an ISA or in a spouse or (trusted! ) partner's name. Alternatively, you can buy a different share in the same sector, but I personally find that an unsatisfactory solution.

The second best way to avoid GCT is to use previous losses. If you sell a share at a loss, make a note of it and notify the taxman; then you can offset any gains against the loss. It is important to note that if the loss is in the same year as the gain, you effectively lose all or part of your CGT allowance, because the loss is used up first. So, say you bought £10,000 worth of shares and they fell in value by half. You sell and get back £5000, and book a £5000 loss. In the same year, you buy £10,000 of another share and they double. You sell for a £10,000 gain. You have a CGT allowance worth £8200. Having bought and sold the loss and gain making shares in the same year, you *have* to use the loss first. So £10,000 - £5000 = £5000, well within your CGT allowance but you've lost your losses, if you see what I mean.If you had bought and sold the loss and gain making shares in different years, you would be able to use your allowance, leaving a gain of £1800, which you cover with your loss from the previous year. You can carry the loss forward, so £5000 - £1800 = £3200 to use next year against any gains.

Shares listed on the AIM are classed as a business asset and have CGT advantages ( accelerated taper relief ) but are riskier than main market shares.

Another way to avoid CGT is to spread bet ( baaad idea ), invest in hedge funds or VCTs ( very risky ) or buy gold sovereigns and hope the price of gold goes up ( not a great investment strategy, but good for hedging ).

You can avoid CGT by being classed as a share trader by the IR, but you would still pay income tax on your gains and in any case it involves a whole lot of other complications.

HTH

Cheerfulcat