Shares and Capital GainsTax

theoilman

Hi

I have been saving in a Sharesave scheme at work for some years and hold shares that are currently worth approx £20k. I was thinking of selling most of my shares but have read about Capital Gains tax but I don't fully understand it. Could someone explain to me the tax implications if I were to them all. FYI if needed I earn approx £8500 per year, don't know if that is of any relevance!

Any information would be gratefully received
Thanks

kangoora

You pay CGT on any 'profit' made on sale of shares (among other things) above £11,000. CGT rate is 18% of your profit based on your income of £8500 and you need to declare it to HMRC if over £11k profit.

For example: you buy shares at a pound and the price when you sell them is £2, you've made £1 profit per share. In this scenario you can sell 11,000 shares for £11k profit (£1 per share) and actually put in your pocket £22k (£2 per share) without paying tax

Where it gets difficult is calculating your profit if you have been buying the shares over many years as you probably bought them for a wide variety of prices.

Ideally you'll have records of the prices you paid for all these shares so you can calculate for each batch of shares what you paid and how much profit you are making on each when you sell them.

If you don't have these records you've asked at the right time.

You could sell £10k worth of shares before April 6th in this current tax year - obviously you can't be making more than £11k profit if you only get £10k. Then you can sell £10k of shares after April 6th in the new tax year. If you aren't making any other gains in the year liable for CGT (e.g. sale of a buy-to-let property, not your main home) you don't need to declare either transaction as both are under the CGT gains allowance

Hope this helps

gadgetmind

For sharesave, you buy all of the shares at the (possibly discounted) price that will have been announced at the start of the scheme.

Note that in addition to your CGT allowance you can also use that of a spouse if you have one, and you can also transfer £15k of the shares into an S&S ISA within 90 days of exercising the option.

If you get this right, you won't have any tax to pay nor will you have to do a tax return of anything. Ask if you need more info.

Amazin

thank you so much for the info guys. very useful. Just to clarify few things:

Where it gets difficult is calculating your profit if you have been buying the shares over many years as you probably bought them for a wide variety of prices.

Ideally you'll have records of the prices you paid for all these shares so you can calculate for each batch of shares what you paid and how much profit you are making on each when you sell them.

If you don't have these records you've asked at the right time.

yeah, I see that potential headaching:eek:

gadgetmind

Amazin wrote: »

yeah, I see that potential headaching

Yes, it's called a "Section 104 holding" and gets even worse if you trade (mix of buying and selling) and corporate actions also confuse things.

However, as I say, this won't apply to you unless you have exercised but not yet sold shares from different sharesave schemes, or if you also hold shares in the same company already.

kangoora

gadgetmind wrote: »

For sharesave, you buy all of the shares at the (possibly discounted) price that will have been announced at the start of the scheme.

Note that in addition to your CGT allowance you can also use that of a spouse if you have one, and you can also transfer £15k of the shares into an S&S ISA within 90 days of exercising the option.

If you get this right, you won't have any tax to pay nor will you have to do a tax return of anything. Ask if you need more info.

Very good point - I forgot about this. Yes, if you got the shares recently as a lump you could transfer £15k worth into an ISA and pay no tax on selling them, even immediately after the transfer. Then you'd also still have your £11k CGT allowance.

However, I think in the OP case he's been buying them for years under a monthly SAYE

gadgetmind

With a monthly SAYE, you save some money every month. At the end of the term (usually 3 years) you can withdraw the money or use it to purchase shares at the price agreed at the beginning of the sharesave scheme. This means there is no complication regards establishing the purchase price or date.

Things are different for SIPs but SAYE is simple.