Calculating CGT tip

capital0ne

An investment I have outside of an ISA wrapper has increased in value by 32.55%

The CGT allowance for 2017-18 is £11,300

To work out the value of shares to sell to remain within the CGT allowance you simply divide £11,300 by the percentage increase.

In this example the calculation is £11,300 / 0.3255 = £34,715 is the value of shares to sell and remain within the CGT allowance for 2017-18

Quite simple really, but some people may struggle with working this out. :beer::T:beer:

bowlhead99

capital0ne wrote: »

An investment I have outside of an ISA wrapper has increased in value by 32.55%

In this example the calculation is £11,300 / 0.3255 = £34,715 is the value of shares to sell and remain within the CGT allowance for 2017-18

Quite simple really, but some people may struggle with working this out.

They would certainly struggle working it out your way.

If the investment has gone up by 32.55% of its original price, as you suggest. Then every 10,000 of original cost is now worth £13,255.

So of every 13,255 of proceeds you get, £10,000 will be cost and £3,255 will be gain.

Another way of saying that, is that of what you sell, 3255/13255ths of it those proceeds (about 24.6% of it) will be gain.

So if 24.6% of what you sell is gain, and you follow your rules that: "£34,715 is the value of shares to sell and remain within the CGT allowance", then when you sell shares valued at £34715, you will get a gain of only £8525. Which is well within your allowance, so no tax to pay, but is almost £3k short of using up your allowance.

The maths on that from the other end would be:
- bought shares for a cost of £26190
- they went up in value by 32.55%, to a value of 1.3255 x 26190 = 34715
- so when you sell shares valued at 34715 you are selling shares which had cost 26190

- the difference between what you get on sale (34715) and what you paid (26190) is what you have gained (8525).

- which is well short of using up your allowance.

Tom99

I think £34,715 is the original cost of the shares to sell not value.

So £34,715 + 32.55% (£11,300) = £46,015 value to sell

£11,300/0.3255+£11,300=£46,015

ColdIron

capital0ne wrote: »

Quite simple really, but some people may struggle with working this out

You are Diane Abbott and I claim my £5

bowlhead99

Tom99 wrote: »

I think £34,715 is the original cost of the shares to sell not value.

So £34,715 + 32.55% (£11,300) = £46,015 value to sell

Yes, that's how a normal person would do it

capital0ne

Thanks Bowlhead, and Tom99, my tactic worked. By posting an answer that wasn't quite right challenges people to put it right, whereas a simple query usually results in a link to aa CGT calculator or no reply whatsover.

Many thanks to both of you

TBC15

capital0ne wrote: »

Thanks Bowlhead, and Tom99, my tactic worked. By posting an answer that wasn't quite right challenges people to put it right, whereas a simple query usually results in a link to aa CGT calculator or no reply whatsover.

Many thanks to both of you

I wish all my faux pass could be exited so gracefully.

capital0ne

Simple formula time

CGT Allowance / (1 - 1/gain) where the gain of 32.55% is represented as 1.3255

Thanks all

bowlhead99

TBC15 wrote: »

I wish all my faux pass could be exited so gracefully.

They could be if you didn't mind the reputational risk of being known as a person who was always needing to find an exit for your cheery mistaken proclamation.

Say something emphatic, foot it with "simples!" or clappy beery emoticons and then when corrected you have the choice of just ignoring the correction or saying that you were just trolling for the correct response. Then people can look at your posts on other threads and try to conclude whether you're an ignoramus or a troll or both...

Not that I'm suggesting people think that way of capital0ne, of course.

capital0ne

bowlhead99 wrote: »

They could be if you didn't mind the reputational risk of being known as a person who was always needing to find an exit for your cheery mistaken proclamation.

Say something emphatic, foot it with "simples!" or clappy beery emoticons and then when corrected you have the choice of just ignoring the correction or saying that you were just trolling for the correct response. Then people can look at your posts on other threads and try to conclude whether you're an ignoramus or a troll or both...

Not that I'm suggesting people think that way of capital0ne, of course.

Thanks bowlhead, glad you like my tactic, and I appreciate your kind comments, just for you two beer cheers and a clap! :beer::beer::T

bowlhead99

Glad you like my reply, here's a fix for your badly explained formula:

capital0ne wrote: »

Simple formula time

CGT Allowance / (1 - 1/gain) where the gain of 32.55% is represented as 1.3255

Better is:

CGT Allowance / (1 - 1/ratio of current value to original cost).

Better than calling 'the ratio of current value to original cost' (1.3255 in this formula) the 'gain' and then having to redefine what you mean by gain to make it work.

In CGT parlance the 'gain' is a difference between value and cost. Not a valuation multiple that gives you the current value when you multiply it by the cost.