Need help calculating Capital Gains Tax on share sale

elwy

Hi and thanks for reading, I hope someone can make sense out of this for me!

On the 1st April 2015, I sold 814 Prudential shares at £16.7725 each for a total of £13,652.82.

After commission and PTM levy deductions the final consideration was £13,447.03.

The shares were originally bought at the price of £2.884 and my CGT allowance for the year 2014/15 was £11,000.

So if I've understood how to calculate capital gains tax correctly, that's a gain in value of 5.82x meaning that the original cost of the shares I sold was £2,310.49.

So the profit from that sale was £13,447.03 - £2,310.49 = £11,342.33 which is over the CGT allowance threshold.

Am I right in thinking I owe capital gains tax on this sale or is there something I might have overlooked? I know that at the time I tried to calculate the CGT allowance and stay under it, so perhaps I did have a reason for selling that many shares that I've since forgotten. Or maybe I miscalculated and accidentally sold too many.

jimjames

My understanding is that you will owe tax on the amount over the limit so £342.33. Depends on your tax rate what tax you pay but 18 or 28% so between £61 and £95.

Pain to pay tax but not massive amount, assuming no other gains this year.

Edit - but I've just re-read your post. You say 1/4/2015. So that was last tax year not this one and therefore tax was due by 31/1/2016. Not sure on penalties for late filing and what that might impact.

elwy

Thanks. Yes, it was the previous tax year. I didn't notice because I thought I'd made the proper calculations and stayed within the allowance limit. It's only now that I'm sorting through my finances that it struck me as odd, otherwise I never would have spotted it. I don't understand how I could have made a mistake like that.

It's the first and only time I've ever sold shares and my first brush with CGT. I've never had to do tax returns before either. I'm somewhat horrified that I've managed to mess it up.

I guess I'd better talk to HMRC.

jimjames

elwy wrote: »

I guess I'd better talk to HMRC.

I'd imagine if you contact them and explain then you'll probably just have to pay the tax outstanding. Did you do a tax return for the last tax year?

elwy

No, I've been unemployed for five years and was PAYE before that. I've never done a tax return in my life.

bigadaj

I think your gain is a little less from the imformation you've given, and you can deduct purchase costs but still probably above the £11k.

The one other thing that springs to mind is what was your total earnings for that tax year. Cgt rates are now dependent on the rate at which you pay tax, so it may be that if your other earnings were below the personal allowance for the year there would be no cgt to pay, I can't find a reference for this so I'm not sure.

Biggles

Yes, your gain is certainly less than your figure, I'm not sure why you used the figure of 5.82 times, as that seems to relate to the share price itself, rather than the correct figure, ie actual proceeds minus actual cost.

The cost must have been at the very least 814 times £2.884 = 2347.58. To this must probably be added stamp duty at 0.5% (so another £11.74) and dealing costs (£20?). You really need either the original paperwork or a conversation with the broker involved.

So the actual cost may have been £2380 or thereabouts, leaving a capital gain of maybe £11,067. Still above the threshold, but not by much now. Hopefully HMRC will be reasonable in the circumstances.

elwy

bigadaj wrote: »

The one other thing that springs to mind is what was your total earnings for that tax year. Cgt rates are now dependent on the rate at which you pay tax, so it may be that if your other earnings were below the personal allowance for the year there would be no cgt to pay, I can't find a reference for this so I'm not sure.

Since I'm unemployed (housewife) I had no other earnings in that year and I'm a non-taxpayer. I was wondering if I could count the proceeds of the share sale under my tax-free personal allowance before considering CGT, but I can't find any precedent for this either. Unless anyone can tell me differently, I think that personal allowance only relates to income tax and not applicable to CGT?

Biggles wrote: »

Yes, your gain is certainly less than your figure, I'm not sure why you used the figure of 5.82 times, as that seems to relate to the share price itself, rather than the correct figure, ie actual proceeds minus actual cost.

The cost must have been at the very least 814 times £2.884 = 2347.58. To this must probably be added stamp duty at 0.5% (so another £11.74) and dealing costs (£20?). You really need either the original paperwork or a conversation with the broker involved.

I was using the share price to calculate what I thought was the gain, i.e. £16.84 ÷ £2.884 = 5.839. I guess I was going about it totally the wrong way, because I see your point that the shares must have cost at least 814 x £2.884 = £2347.58

I don't know if any additional purchase costs were involved as the shares were bought through my husband's company scheme and he transferred the shares to me afterwards for lower dividend tax.

If it helps, it was a fixed option monthly investment scheme. He paid £250 a month over 5 years into the scheme and the company contributed an additional £650.

I appreciate all the help, I feel pretty lost and it's getting clear that I don't really know what I'm doing!

Biggles

elwy wrote: »

I don't know if any additional purchase costs were involved as the shares were bought through my husband's company scheme and he transferred the shares to me afterwards for lower dividend tax.

If it helps, it was a fixed option monthly investment scheme. He paid £250 a month over 5 years into the scheme and the company contributed an additional £650.

That could complicate it a lot. Some one who knows more about company share schemes than I do might be able to help?

elwy

Just to clarify; my husband paid £250 a month for 5 years for a total of £15,000 invested. The company added a further £650 for a total of £15,650. All the shares over this 5 year period were purchased at the fixed price of £2.884, making a total of 5426 shares.

Can anyone tell me how to use this information to work out what 814 of those shares originally cost, for tax purposes?

Is it 814 x £2.884 = £2347.58?

Or is it £15,000 / 5426 * 814 = £2250.28?

or something else?

Lakeuk

Start value 2.884 * 814 = 2347.576
End value 16.7725 * 814 = 13652.815

11305.239 gain
11000 less allowance

305.239 taxable gain

You can also reduce the taxable gain by any share dealing costs, multiple final amount by your tax rate to give you what you need to pay