Tax on investments

adamcartney

I've exhausted by ISA allowance for this year and want to carry on making equity investments. But I've never invested outside a SIPP or ISA before, so have no idea about what I have to declare or what paperwork is involved. I aim to take profits (if possible!) before I exceed the CGT allowance. Does this mean that I don't have anything to declare?

Sorry if this sounds a silly question but from reading some of the posts on here and on monevator I've got the impression that filing in tax returns for investments is devilishly complicated. But I wonder if that is because they have exceeded their annual allowance?

I'd be very grateful for some advice on this. Thanks.

Linton

Outside an ISA or SIPP you will have to keep detailed records of all transactions as HMRC can request previous years' information in the future even if you dont owe CGT. That is perhaps the main reason for the small investor to use S&S ISAs.

There are various situations where you must report you capital transactions. See here.

kidmugsy

I'm guessing, but I'd think that CGT gets complicated to calculate only if you've bought a particular share several times at different prices. If you buy just once, and don't use DRIP (i.e. don't reinvest the dividends in the same share), surely the sums would be simple? Or am I being naive?

Vortigern

kidmugsy wrote: »

I'm guessing, but I'd think that CGT gets complicated to calculate only if you've bought a particular share several times at different prices. If you buy just once, and don't use DRIP (i.e. don't reinvest the dividends in the same share), surely the sums would be simple? Or am I being naive?

I think you're absolutely right. The record keeping is not onerous and basic rate PAYE taxpayers are unlikely to hear anything from HMRC.

adamcartney

Thanks.
I'm a higher-rate taxpayer and intend to reinvest the dividends. But I also intend to sell before exceeding my CGT allowance. This does mean that I don't need to report anything to HMRC?

kidmugsy

adamcartney wrote: »

Thanks.
I'm a higher-rate taxpayer and intend to reinvest the dividends. But I also intend to sell before exceeding my CGT allowance. This does mean that I don't need to report anything to HMRC?

I think you've got to report your dividends, so you'll have to do a self-assessment anyway.

Apodemus

If you are planning on buying and selling, chances are your holdings will be held in a nominee account with one of the stockbrokers and they should give you an annual statement for tax purposes. It is then a simple matter to transfer the figures to your tax form. It is the one benefit of the nominee approach in return for the account fees that they usually charge.

Reinvesting the dividends is not of itself a problem, reinvesting in the same company just means that calculating the dividends for income tax and the average purchase cost for CGT can become more complicated.

CLAPTON

kidmugsy wrote: »

I think you've got to report your dividends, so you'll have to do a self-assessment anyway.

depends
for modest gains a letter to HMRC is OK

kidmugsy

CLAPTON wrote: »

depends
for modest gains a letter to HMRC is OK

Never mind the gains, he surely has to pay income tax on the dividends?

jem16

kidmugsy wrote: »

Never mind the gains, he surely has to pay income tax on the dividends?

He does as dividend income, whether reinvested or not, is subject to extra tax for higher rate taxpayers.

However he may still only require to phone HMRC to declare the amount which he should already be doing with savings interest.

redux

kidmugsy wrote: »

I'm guessing, but I'd think that CGT gets complicated to calculate only if you've bought a particular share several times at different prices. If you buy just once, and don't use DRIP (i.e. don't reinvest the dividends in the same share), surely the sums would be simple? Or am I being naive?

I'm guessing too, but my assumption is that for example if some shares were originally bought in a monthly savings scheme for something between £1000 and £3000 aggregate and now sold for say £9000 or £10,000, the sum realised is within the annual CGT allowance and the acquisition cost could be notionally thought of as estimated without having to check all the old monthly records in close detail.

Of course if someone hopes to sell enough to move £15,000 into that year's ISA, they might have to do a bit more maths, picking something to sell that cost £4000 or more.