Bed & ISA vs Bed & Breakfast

edited 30 November -1 at 1:00AM in Savings & Investments
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  • williamrowilliamro Forumite
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    Am I correct in assuming that the 30-day rule does not apply within an ISA so one can buy and sell the same share within a week without any breaking of the rules?
  • eskbankereskbanker Forumite
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    williamro said:
    Am I correct in assuming that the 30-day rule does not apply within an ISA so one can buy and sell the same share within a week without any breaking of the rules?
    Yes, any activity within an ISA is irrelevant as far as CGT is concerned.

    Even outside an ISA, the 30-day 'rule' isn't really one to be 'broken' as such, it just signifies that affected repurchases are matched with sales to nullify disposals for CGT purposes....
  • dunstonhdunstonh Forumite
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    williamro said:
    Am I correct in assuming that the 30-day rule does not apply within an ISA so one can buy and sell the same share within a week without any breaking of the rules?
    ISAs are not subject to capital gains tax.  Therefore any rules that apply to capital gains do not apply to ISAs (or any other tax wrapper which is not subject to CGT).

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • williamrowilliamro Forumite
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    Thanks dunstanh and eskbanker for your useful replies.  eskbanker could you please elaborate on your last paragraph perhaps by way of an example?
  • eskbankereskbanker Forumite
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    williamro said:
    eskbanker could you please elaborate on your last paragraph perhaps by way of an example?
    eskbanker said:
    Even outside an ISA, the 30-day 'rule' isn't really one to be 'broken' as such, it just signifies that affected repurchases are matched with sales to nullify disposals for CGT purposes....
    The 30-day rule simply means that if you repurchase what you sold within 30 days then that sale is effectively ignored for CGT purposes, i.e. the starting point for any subsequent CGT calculations remains the original purchase.

    Let's say you buy 10,000 units of an asset at £10 and a year later their value has risen to £11.

    If you sell them all then (ignoring costs), that crystallises a capital gain of 10,000 x (£11-£10) = £10,000, so as this is below your annual CGT allowance you have no tax to pay.

    If you repurchase those units again at £11 after 30 days, you now have 10,000 units at an average price of £11, but if you do so within 30 days then the repurchase is matched with the sale, meaning that your average unit price remains at £10, leaving you liable for a higher CGT bill in future years.

    In other words, the role of the 30 day rule is to hinder investors from easily recycling their (unwrapped) investments every year to minimise CGT liability - it certainly doesn't actually prevent them from doing this but by imposing a 30 day window it makes it a bit harder.
  • williamrowilliamro Forumite
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    Thank you very much but no doubt it would be much more complicated if multiple part sales took place and multiple repurchases of different numbers of shares both within and without the 30 day period.
  • edited 17 March at 3:37PM
    underground99underground99 Forumite
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    edited 17 March at 3:37PM
    williamro said:
    Thank you very much but no doubt it would be much more complicated if multiple part sales took place and multiple repurchases of different numbers of shares both within and without the 30 day period.
    For each disposal you would just follow the rules to determine which shares or pool of shares held at sale date or acquired on a future date will be matched to what you are selling. Yes, it is more complex if there are more transactions. So it's useful to hold shares in an ISA rather than outside it, as you don't need to keep records of any transactions in the ISA and they are not matched with non-ISA transactions.

    What he is saying is that you don't need to characterise any pattern of buying or selling as 'breaking the rules'. You are completely free to buy or sell whatever you want when you want. If you sell, you're welcome to buy more shares of the class of shares you just sold within 30 days or beyond 30 days, or both, or neither.  The 'rules' on matching of shares bought and sold (outside a tax wrapper) are simply something you need to follow when calculating your taxes. 
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