How many shares can I sell without incurring capital gains tax?

elwy

My husband bought £15,000 worth of shares through a company scheme over several years. Those shares are now worth about £90,000. He has transferred them all to me as I am a non-taxpayer and we now want to start disposing of the shares.


I understand that my capital gains tax allowance is £11,000 if I sell before this tax year ends. Does this simply mean that I can sell up to £11,000 worth and it's all considered 'gains'?


What part of the shares is not considered gains? Is it only the last £15,000 remaining?


So in other words, assuming that the CGT allowance remains at £11,000 each year (unlikely I know) does that mean that I can sell £11,000 worth of shares each year until there is £26,000 or less remaining - then I can sell the final £26,000 as £11,000 allowance + £15,000 non-taxable capital?

talexuser

Capital gains is the difference between the price you paid for the shares and the price you sell them at, minus transaction costs.


So if some shares cost eg 10k when you bought them and are worth 21k now, there would be no tax to pay. So you need to sell in tranches of £11000 gains this year in order not to pay tax on the proceeds. And £11100 next tax year after April 6th, and so on.

bowlhead99

You have an allowance of £11000 profits that you can make every year before paying tax. Every time you sell shares, they must have cost something. The difference between what they cost and what you are now selling them for, is the profit, which counts towards your capital gains tax allowance.

You said the £90000 of shares had a cost of £15000. So, put another way, every £90 of value has a cost of £15. Which is the same as saying that every £6 of current value has a cost of £1.

So, you could say every £13200 has a cost of £2200. Which means that every £13200 of sales proceeds will be £2200 return of cost and £11000 of profit.

So, assuming the current share price stays exactly the same, with a value of £90 for the initial £15 of cost, then you could sell £13200 this week and make exactly £11000 of profit and pay no tax. Next week is a new tax year so you can sell another £13200 and make another £11000 of profit and still not pay any tax if you make no more gains in the 2015/16 tax year.

Then in 2016/17 tax year you can sell some more. Your original cost was £15000, but you got rid of £2200 of cost this week and £2200 of cost next week, so there is only £10,600 of cost remaining for your remaining pile of shares. When you get to 2016/17 you can see what they are worth to sell.

If they are worth £106,000 at that point, against a £10600 cost, then every £10 of sales proceeds will be £1 of cost and so you can sell £12200 of shares with a cost of £1220 and that will be another £11000 of gains made and carry the rest forward to sell the next year.

However if instead the company share price crashes, perhaps the whole pile of shares is only worth £20,000 instead of £106,000, and you could sell all of them and make under £10000 profit and be done. In that situation you will wish you had sold them all next week instead and paid the taxes.

elwy

Wow two very different replies giving me completely different answers!


This makes perfect sense though. I had a suspicion that my £11,000 capital gains allowance meant I could actually sell more than £11,000 worth of shares. Thanks for clarifying.

Biggles

elwy wrote: »

My husband bought £15,000 worth of shares through a company scheme over several years. Those shares are now worth about £90,000. He has transferred them all to me as I am a non-taxpayer and we now want to start disposing of the shares.

That was a bad decision, as (unless he has other capital gains) you are currently both 'non-taxpayers' from this point of view.

If you want to dispose of all the shares, the best thing you can do is transfer 50% of them back to him immediately and you can then sell sufficient to make £11,000 gains (or whatever the limit becomes) each in a tax year.

Unfortunately, it will now probably be too late to do it this tax year, so the decision to transfer them all to you would mean that only you can dispose this year and then you can both take advantage.

Biggles

elwy wrote: »

Wow two very different replies giving me completely different answers!

No, if you read them carefully you will find that they both gave you exactly the same answer.

elwy

The reason for transferring to me was to minimise dividend tax as he is a higher rate taxpayer. At the time he wasn't thinking of selling the shares so yes it would help if I could transfer some back. Can spouses freely transfer shares to each other as many times as we like?


The way I read it, the first answer told me that I could sell my CGT allowance worth of shares each year while the second told me I could sell an additional amount of shares equal to the cost price of the CGT allowance based on the current share price?

bowlhead99

It's a capital gains allowance, not a capital proceeds allowance. So the answers above are the same. Sell enough to take as much gain as possible without going over the £11000 if you want to avoid tax. Or forget about saving tax and sell as much as possible and pay all the tax if you want to avoid the shares plummeting in value.

Biggles

elwy wrote: »

The way I read it, the first answer told me that I could sell my CGT allowance worth of shares each year while the second told me I could sell an additional amount of shares equal to the cost price of the CGT allowance based on the current share price?

No, the first one said you could sell '£11000 gains' and the second said '£11000 profit'. But it's the same thing.

bowlhead99

elwy wrote: »

The way I read it, the first answer told me that I could sell my CGT allowance worth of shares each year while the second told me I could sell an additional amount of shares equal to the cost price of the CGT allowance based on the current share price?

No. Both answers told you you could sell whatever amount of shares would make you a gain of £11000 in a year.

Every single individual share cost you something. If £21000 of shares cost £10000 you can sell them and make £11000 of profit. If £13200 of shares cost £2200 you can sell them and make £11000 of profit.

You know how much each share cost. And you know how much each share is worth today. So you know how much profit you will make on every share. So sell the number of shares that makes £11000 profit - or a bit less, to avoid accidentally going a bit over

And yes, you can transfer shares to your husband at no gain, no loss and have him use up his allowance too when sells for a profit.

Biggles

bowlhead99 wrote: »

And yes, you can transfer shares to your husband at no gain, no loss and have him use up his allowance too when sells for a profit.

But, unfortunately, I assume a transfer tomorrow would now only take affect after the (long) weekend, meaning only the OP can make a sale by Thursday, ie in this tax year?