Capital Gains Tax - When Do I Need to Pay it?!

MickyJ

Hi, everyone.
I apologise in advance for asking such a basic question, but I really need your help to understand this before I decide (or not) to invest in a Sharesave plan at work.


I am not a 'savvy' investor, I'm just an ordinary bloke who want's to make a bit of money for my family if possible - or, as my employer puts it on their brochure 'share in the company's success', so all this is really confusing for me. My place of work makes it all sound so good, but I don't want to get caught out by all the complicated stuff and end up being in trouble for not paying tax because I'm a bit thick and don't understand it all.


My question is regarding Capital Gains Tax, and it's best described by the following example:
Lets say I have come to the end of my plan and I decide to buy the shares and then sell them straight away. In doing so, I've made a profit of £6,000. Would I need to pay any Capital Gains Tax on this profit? My understanding is that I wouldn't because it's under the eleven thousand pounds I'm allowed to make per year. Am I correct, or have I got it completely wrong?
I'm, a basic rate tax payer earning about £25,000 per year and don't have any other investments or income or anything like that. I just work in a shop!

gadgetmind

MickyJ wrote: »

I apologise in advance for asking such a basic question, but I really need your help to understand this

Don't worry - we're not born knowing this stuff!

Lets say I have come to the end of my plan and I decide to buy the shares and then sell them straight away. In doing so, I've made a profit of £6,000. Would I need to pay any Capital Gains Tax on this profit? My understanding is that I wouldn't because it's under the eleven thousand pounds I'm allowed to make per year. Am I correct, or have I got it completely wrong?

No, you're spot on, zero tax to pay under those circumstances. Furthermore, there are *loads* of ways to use ISA, spouse, and spreading selling across tax years to get *much* more than this tax free if the shares do well.

Sharesave plans (aka SAYE) are pretty much no-brainers so fill your boots. Best case, share price soars, doubles all round! Worst case, you get your money back.

lozzy1965

You are correct. You do not need to pay any capital gains tax until you make over 11K profit.

mike88

If you make in excess of an £11000 profit then you could stagger your sales over more than one financial year.

gadgetmind

mike88 wrote: »

stagger your sales over more than one financial year.

I know it's nit picking, but it's tax years that matter. The company in question will also have a financial year, and potentially closed periods when employees can't buy/sell shares, so you do need to understand which is which.

mike88

gadgetmind wrote: »

I know it's nit picking, but it's tax years that matter. The company in question will also have a financial year, and potentially closed periods when employees can't buy/sell shares, so you do need to understand which is which.

Thanks. I meant of course tax year.