CGT and Shares. Newbie needs help:S

dan-and-mike

Hey all,

So I got lucky with some shares, and my £5k investment is now worth just shy of £25k.

My dad's big on shares and such, but I can't get to grips with how he's explaining it.

From what I understand, if I cash it in, I need to pay CGT, but my dad has said I should cash in my £5k, and get back what I've put in meaning everything else isn't costing me as such to remain in shares and I'll earn a dividend on this money?

Am I understanding this right?

The savings will be my house deposit, so how can I go about getting this money whilst paying as little as possible on it?

Cheers

Dan

CLAPTON

you have a yearly cgt allowance of 10,800

so if you sell have now and half after 6 april 2014 then no tax

00ec25

you have a tax liable gain of 20k (25 - 5)
if you do as Clapton says and sell 50% of the shares either side of the tax year then your gain will be 10k and 10K which will be covered by the CGT exempt allowance for each tax year so you would not pay any tax at all doing it that way

chrismac1

Before we get to the selling bit there is in my view an earlier stage of whether that is the right thing to do. The mere fact that a share has increased 500% does not mean it can't do the very same thing again.

On my own investing I beat the market by 4% per year on average. Whilst this will not sound a lot to you, it makes the difference between doubling your money every 12 years and quadrupling it every 14 years. My iron rules:

1. Dump anything which drops 25% without even asking why.
2. Consider investing more in anything which has risen 25%.

So even although your share might be 20% of my portfolio I would be considering investing more in it BUT with a very tight stop loss. i.e. if it were to drop by say 10% for any reason then I would dump half of it.

Warren Buffet is the most successful investor there has ever been - Google him. He's pretty relaxed about paying big tax bills on stocks he's held for 10 or 20 years. That's good enough for me, though as the other posts on this thread indicate the UK has some favourable rules on CGT so I've never paid any yet.

If you decide to keep all or part of this holding you could transfer it into a SIPP or ISA - subject to the limits on those investments for the tax year - and shelter it from tax that way. £25k is a decent sum to kick off a long term buy and hold stock portfolio with.

chrismac1

I missed the bit about the house deposit, sorry. If you need all £25k then as other posters have said, sell half "now" and half on 6 April.

"now" - we're just about to start the traditional "Santa rally" - which is as reliable as anything in the markets, with a 90% or so strike rate. So if you want to benefit from this you could wait until 2 or 3 Jan for the first sale.

dan-and-mike

cheers folks!

Plan of attack now is to sell off half this year, and save it elsewhere and keep the other half in the shares which means if anything happens and I need the money I don't need to wait a full financial year to get it tax free.