Oeics

drakesdrum

Hello All,
I purchased an investment fund in October 2010 and I'm looking to cash it in.
I paid £10,000 then,and it's worth £13900 as of today.
Could anyone tell me whether (a) CGT is applicable and (b) whether any other taxes are due when cashing in.
Thanks very much

Vortigern

A1 you've made a gain of £3900, you have a CGT allowance of £11,000 so there's no CGT to pay unless you've made other chargeable gains elsewhere. Have you sold any houses, or works of art?

A2 If it's in an ISA there's no CGT ever.

B there are no other taxes payable

talexuser

CGT is not due, only due if the difference between the price you paid and the price you sell is more than £11000 (14/15 tax year)

drakesdrum

Vortigern wrote: »

A1 you've made a gain of £3900, you have a CGT allowance of £11,000 so there's no CGT to pay unless you've made other chargeable gains elsewhere. Have you sold any houses, or works of art?

A2 If it's in an ISA there's no CGT ever.

B there are no other taxes payable

Thank you for you prompt reply. I've not sold any houses or art and the investment was not placed in an ISA wrapper.

drakesdrum

talexuser wrote: »

CGT is not due, only due if the difference between the price you paid and the price you sell is more than £11000 (14/15 tax year)

Thank you for your speedy reply. I've not sold any other investments this year. Can I carry forward unused CGT allowance?

Vortigern

https://www.gov.uk/capital-gains-tax/overview

No carry forward but the allowance goes up to £11,100 on April 6th.

You get a new CGT allowance each tax year, so it's possible to avoid CGT by selling a chunk of your assets ech tax year.

gadgetmind

Does this OEIC pay out either as income or dividends? Even if an accumulation version, you need to take these into account, and not just when you sell.

drakesdrum

gadgetmind wrote: »

Does this OEIC pay out either as income or dividends? Even if an accumulation version, you need to take these into account, and not just when you sell.

Hi gadgetmind thanks for your reply,It's an accumulation fund. Would this make a difference when calculating the capital gain for CGT purposes?

bowlhead99

drakesdrum wrote: »

Hi gadgetmind thanks for your reply,It's an accumulation fund. Would this make a difference when calculating the capital gain for CGT purposes?

Yes it would reduce the capital gain.

Lets say you invested £10,000 in a fund. After a while, they paid you £200 dividends. But you didn't have the Inc version of the fund you had the Acc instead, so they didn't physically send you the £200, they just kept it in the fund and kept the NAV of the fund high, and used the money to buy more investments.

So effectively you now have a fund worth £13,900 which you think of as having cost you £10,000. But actually it cost you £10,200 (which you funded with £10,000 of cash and £200 of dividend money). So, the capital gain is the diff between £13900 and £10200 = £3700 which is lower than the £3900 you might have first thought.

Not a problem if you have £11000 of unused CGT allowance of course, because £3700 or £3900 both fit into £11000 quite easily with plenty of unused allowance left over.

Then separately:

and (b) whether any other taxes are due when cashing in.

You may have tax to pay on your dividend or interest income if you are a high rate taxpayer (i.e. in the 40%+ tax band). You don't avoid this just by selecting an Acc fund instead of an Inc fund. You would still need to pay tax on the divs 'earned' whether paid to you or not.

You can get the divi information off a statement from your platform which are sent out when divis are done (or annually). If you are a low rate taxpayer you won't be paying tax but depending how close you are to the 40% tax band, you might need to know the numbers to make sure that receiving the income has not moved you to a higher tax bracket for the relevant year.

So to summarise:

- CGT is paid on your proceeds less costs and the costs include reinvested dividends over the years. CGT is payable when you realise the gain (i.e. sell the fund for more than you paid)

- Income tax is payable if you are higher rate taxpayer. Although, it is not owed specifically 'when cashing in' it is just generally owed when you earn it (i.e. for the various years between 2010 and now)

If you are using ACC funds and have chosen not to put them in an ISA or pension wrapper you would need to get the income vouchers for each year to work out your true cost and income. If you are low rate or nil rate taxpayer for every year since 2010/11 then you won't have income tax to pay, and you can see the gain isn't over the 2014/15 allowance then no tax implications other than keeping records for HMRC to audit you on.

drakesdrum

Hi bowhead99 Thank you so much for such a comprehensive reply.It really does help me gain a more in-depth knowledge of the nuts and bolts of investing.