Capital Gains Tax on Funds

upperlayham

Hello All,

I had a quick question on CGT.

If I invest some money in a fund (not in an ISA), when would the CGT be calculated for the purposes of the CGT allowance? Is it per year, or only when I eventually take the money out? And when I take it out, would I just receive the allowance of £11k, or is it £11k x the number of years it has been invested?

The reason I ask is that I want to take advantage of the CGT allowance. I am unsure as to whether or not this is beneficial over just using a Fund ISA.

Many thanks.

Lokolo

It is calculated the same way as any capital gains.

Sell cost - buy cost = gain

Gains are only calculated upon selling and the gain is made against your CGT allowance in that year of selling.

So if you buy for £5,000 in 2004. Sell in 2014 for £30,000 you have made a gain of £25,000 and it will be against your 2014 allowance.

upperlayham

For tax purposes, would it therefore be best to withdraw the money from the fund when it has made a return of £11k or below, and then re-invest in the same or a different fund?

gadgetmind

If you re-invest in the same fund, you need to leave it for at least 30 days due to the share identification rules.

http://www.hmrc.gov.uk/cgt/shares/find-cost.htm

Note that you also need to look at the tax situation income from the fund (which may or may not be paid as dividends depending on the fund) and you can't avoid this using an accumulation fund.

Here are a few articles you should read.

http://monevator.com/avoid-income-tax-with-reporting-funds/

http://monevator.com/income-tax-on-accumulation-unit/

http://monevator.com/excess-reportable-income/

Personally, I wouldn't hold funds unwrapped as everything is far simpler with Investment Trusts!

jimjames

upperlayham wrote: »

For tax purposes, would it therefore be best to withdraw the money from the fund when it has made a return of £11k or below, and then re-invest in the same or a different fund?

Have you already used up your ISA allowance?

Rather than selling each time your profit rises above £11k why not just sell sufficient to raise £11k profit when you need money, spread that over a number of years and you should be able to cover it unless you have hundreds of thousands.