Income tax, or capital gains

marlot

I have a an HL Fund and Share Account (not ISA). It's been doing well the last couple of years.

Most of the money is in a Legal and General US tracker (accumulation version).

Can anyone tell me what I pay tax on? Is it the capital gain as/when I sell? Or is it income tax?

Many thanks!

MallyGirl

Capital gains when you sell

marlot

Thanks. That suits me well.

I've not used my capital gains allowance this year. Should I take some money out and put it back in again to realise the gain?

MallyGirl

You should monitor the gain your investments have made - if it is approaching £11k then you need a plan. It is tied to tax year so you can stage sales rather than sell all at once. If you are happy with the fund you could buy the same again - if you don’t have an ISA you could start one and buy inside that.

bowlhead99

Each year, you pay income tax on the dividends that were allocated to you and accumulated (reinvested for you automatically within the fund).

For e year in which you actually sell some of your shares/units, you pay capital gains tax on the amount by which your sales process for those units exceed the purchase costs for those units.

The purchase costs for CGT purposes include the cash paid and also the dividend income which was reinvested over the years.

When I say, "you pay", I mean the respective income or gains are taxable, but you might not actually have any tax to pay if you have sufficient exemptions or allowances in the year they occur (e.g. personal dividend allowance, general income personal allowance, annual exempt amount for CGT, etc.)

jimjames

MallyGirl wrote: »

You should monitor the gain your investments have made - if it is approaching £11k then you need a plan. It is tied to tax year so you can stage sales rather than sell all at once. If you are happy with the fund you could buy the same again - if you don’t have an ISA you could start one and buy inside that.

Just make sure that you don't immediately buy the same fund outside an ISA as it won't reset anything for CGT as you need to wait at least 30 days

MallyGirl

Thanks - I didn’t know that. All my investments are ISA wrapped or in a pension

Aretnap

jimjames wrote: »

Just make sure that you don't immediately buy the same fund outside an ISA as it won't reset anything for CGT as you need to wait at least 30 days

Though you can if you wish buy a very similar fund (say, a Vanguard US tracker) without having to wait 30 days - it's only if you buy the same fund that the bed and breakfasting rules kick in.

pip895

IanManc wrote: »

As you have to declare / pay income tax each year on the dividends that were allocated to you and reinvested for you automatically within the accumulation fund I find it easier to invest in income classes of funds if the investments are outside an ISA, as it saves me the effort of hunting for the figures for the sums that have been reinvested and on which I owe income tax.

I have always done the same. If you do end up with acc units though how do you find out the income element? It isn't straightforward particularly if inc units arnt available.

lpgm

pip895 wrote: »

If you do end up with acc units though how do you find out the income element? It isn't straightforward

It should be straightforward. The fund manager or platform tells you.

Keep_pedalling

We always combine stripping out some of our gains with an annual rebalance and ISA top up.