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Declaring Tax on profit from Shares (Please Help)

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Thank you all for your valuable time in replying to my query.

I have a question regarding declaring profit on sold shares. I have 3 scenarios to explain:

1. For example say I invested 200£ in year 2010.
It got tripled in 2013 and became 600£. So every year the actual value of shares increased. But I am selling only in 2013 which means do I need to declare only when I sell it in 2013 or declare every year tax on 200£ profit.

2. Second case is say I invested 200£ in year 2010. I sold it for 400£ in 2010 and bought shares again for 400£ in 2010 sold it for 800£ and bought again for 800£ in 2010 but I haven't sold it in 2010, I sold it only in 2012 for 3000£. I haven't withdrawn any money from my shares account. Whatever profit I got i kept re-investing. Which means in 2010 I invested 200£ and earned 600£ (800-200) profit. So do I need to declare that I have earned 600£ in 2010 or can I declare in 2012 saying I made a profit of 2800£ (3000 - 200 original deposit)? (money still remains in the shares account)

3. Or tax must be paid only when money is transferred from shares account to my bank account.

Please could you help me with this question so that it will help me declare taxes on profit in time.

Thank you,
dino
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Comments

  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    1) Only when sold

    2/3) Tax is paid when profit is cashed in, whether that cash is still in your shares account or not makes no difference.

  • Thanks Lokolo for your comment, The 2nd scenario is pretty much my case. So you are saying I need to declare that I have earned 600£ (800-200) in 2010 and declare again in 2012 that I have earned 2200£ (3000 - 800 = 2200£) , Am I right? Please could you clarify this. Thank you
  • Archi_Bald
    Archi_Bald Posts: 9,681 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    With the numbers you are talking about, no tax is due.

    If the numbers are just examples and you have larger profits from your investments, you may be liable for CGT. http://www.hmrc.gov.uk/cgt/
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    Yes you are correct, but as Archi says, you wouldn't be due to pay anything because you have an allowance for gains. See the above link.
  • Hi, The above numbers are just example. But if I am on a 40% tax bracket and if I earn extra say 600£ extra out of my regular income, I still need to declare the 600£ and pay 40% of 600£ as capital gains tax, isn't it. It will be only tax free if I invested using SHARES ISA account. if i have used normal share dealing account then I would have to pay 40% on 600£. Could someone clarify if I am right?

    I am going to my earlier question on tax declaration period: (please refer to my second post)
    Do I need to declare that I have earned 600£ (800-200) in 2010 and declare again in 2012 that I have earned 2200£ (3000 - 800 = 2200£) or can I declare once for all in 2012 (sum of 2800£) as the money is still in the shares account and not withdrawn anytime during 2010-2012, please could someone clarify?

    Thank you for your valuable time and replies
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    edited 28 January 2014 at 2:30PM
    dc.pecheur wrote: »
    Hi, The above numbers are just example. But if I am on a 40% tax bracket and if I earn extra say 600£ extra out of my regular income, I still need to declare the 600£ and pay 40% of 600£ as capital gains tax, isn't it. It will be only tax free if I invested using SHARES ISA account. if i have used normal share dealing account then I would have to pay 40% on 600£. Could someone clarify if I am right?

    I am going to my earlier question on tax declaration period: (please refer to my second post)
    Do I need to declare that I have earned 600£ (800-200) in 2010 and declare again in 2012 that I have earned 2200£ (3000 - 800 = 2200£) or can I declare once for all in 2012 (sum of 2800£) as the money is still in the shares account and not withdrawn anytime during 2010-2012, please could someone clarify?

    Thank you for your valuable time and replies

    On those numbers exactly, no. You have an allowance of £10,900 before you then pay the tax.

    Should you make profits (after any losses) beyond £10,900 then yes, you would need to pay capital gains tax.

    However you should always keep a record of gains.

    Dividends are different though, they are not classed as a gain and therefore taxed differently.

    Apologies if I confused you a little, I didn't realise those numbers were exactly ones that has happened and thought you were giving an example.
  • Thanks lokolo and everyone for providing valuable feedback.

    Sorry, I am still confused with one earlier question as to when to declare the tax:

    I have increased the threshold so that it jumps off the CGT allowance and hoping it will clarify my question.

    Example: Bought 20000£ shares in 2010. Sold for 40000£ in 2010. Bought again shares for 40000£ and sold for 80000£ in 2010. So in 2010, invested 20K invested, 80K return, 60K profit. This 80K is invested again in 2010 but sold only in 2012 for 120K.

    So do you think I need to declare in 2010 that I got a profit of 50K (60K actually but -10K for CGT) OR can I declare altogether in 2012 that I made profit of 90K (120K final amt - 20K initial investment - 10K CGT). The reason I am asking is I haven't withdrawn the profit it still stays in my shares account.

    2nd Qn: Previously I thought this CGT allowance is applicable only to SHARES ISA account. Do you think this CGT will be applicable even if I invested using normal share-dealing account and not through ISA account?

    Trying to find out exactly when to declare the tax so that I don't miss any tax declaration.

    Thank you all
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    dc.pecheur wrote: »
    2nd Qn: Previously I thought this CGT allowance is applicable only to SHARES ISA account. Do you think this CGT will be applicable even if I invested using normal share-dealing account and not through ISA account?

    Capital Gains Allowance is an additioanl allowance for capital gains OUTSIDE of any tax wrapper.

    Anything inside an ISA will always be tax free.

    Anything outside an ISA will be taxable beyond any allowances. Capital gains for example is one of the allowances.
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    dc.pecheur wrote: »

    Example: Bought 20000£ shares in 2010. Sold for 40000£ in 2010. Bought again shares for 40000£ and sold for 80000£ in 2010. So in 2010, invested 20K invested, 80K return, 60K profit. This 80K is invested again in 2010 but sold only in 2012 for 120K.

    So do you think I need to declare in 2010 that I got a profit of 50K (60K actually but -10K for CGT) OR can I declare altogether in 2012 that I made profit of 90K (120K final amt - 20K initial investment - 10K CGT). The reason I am asking is I haven't withdrawn the profit it still stays in my shares account.

    2010: Correct, you will pay tax on the £50k profit after capital gains allowance, declare it then and pay it then

    You have withdrawn the profit, you have cashed in the shares. It doesn't matter what account it is in, it can be in a current account, a shares account, anything, but you have CASHED IT as you don't own the shares, you sold them for CASH.
  • Thank you Lokolo for your clarification on ISA/ CGT.

    Sorry keep bothering you with multiple requests.

    1 final qn: Please could you say me if I need to declare 50K in 2010 or not?
    Or Can I declare altogether 90K in 2012?
    (Reason: Money not withdrawn all all money is still in shares account)

    Which is correct by law?
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