Capital Gains and shares.

vivvov

Hello All

A couple of years ago I sold my flat..I'd paid off the mortgage and invested a sizable amount of the sale in Unit and Investment Trusts via a couple of platforms whilst I decided where I wanted to buy a property...then didn't buy a property...
I already had a S and S ISA with H and L so invested in a Shares account then realised I'd probably be better off with IWeb due to costs, so opened up another S and S ISA and a Share dealing account and stuck the majority of my investment in there.
I started around July 2018 and things have gone okay so far.
Thing is I have no idea how CGT on shares works, having never been in this position before and the potential to breach the £12k profit for a year is not near, but approaching.
Profit on shares since opening both accounts in approx. June 2018..with the majority invested in June/July is approx £10.5k.
So I thought I'd best understand and get on top of it before it ends up on top of me and racing passed.
Obviously July 2018 to April 2019 the profits didn't go passed £12k.
..and April 2019 to April 2020 profit is unlikely to go passed £12k.
But if it potentially did...?

How do I go about it all?
Next bit is where I come across as thick...

Do I just simply sell just under £12k's worth of Investments and cash it out to my current account in this tax year in order to avoid CGT on shares liability?

Thanks in advance

MaxiRobriguez

You don't pay CGT on investment gains within an ISA.

Nothing to do here - leave the investments as they are if you want, or if you're intending to take the profit to go and spend on some fine caviar then you can do so without any tax implication.

[Deleted User]

Hi,


you are not liable for CGT until you actually sell the shares.

eskbanker

vivvov wrote: »

Thing is I have no idea how CGT on shares works, having never been in this position before and the potential to breach the £12k profit for a year is not near, but approaching.
Profit on shares since opening both accounts in approx. June 2018..with the majority invested in June/July is approx £10.5k.
So I thought I'd best understand and get on top of it before it ends up on top of me and racing passed.
Obviously July 2018 to April 2019 the profits didn't go passed £12k.
..and April 2019 to April 2020 profit is unlikely to go passed £12k.
But if it potentially did...?

CGT liability isn't based on 'profit per year', but the value of any gain (sale value minus purchase value and eligible costs) crystallised via disposal, and up to £12K of such gains can be made per tax year without incurring a CGT liability.

Your references to multiple S&S ISAs and general (non-ISA) investment accounts aren't particularly clear but as above, ignore any gains within ISAs as these are exempt from CGT.

See https://www.gov.uk/capital-gains-tax for a primer on the subject.

Eco_Miser

In addition to the above, generally each financial year sell £20k (or amount yielding just under £12k CG if less) from an unwrapped account, and subscribe £20k to an ISA, within which re-buy the same thing or take advantage of being in cash to rebalance. This is known as Bed & ISA, protects that £20k from further CGT and income tax, and your platforms may have special arrangement to facilitate this.

vivvov

Thanks for the replies

So, for example, am I correct in thinking that if I sell a certain amount of shares in the share dealing account (not the S and S ISA account)..keep the released cash in the share account..then use this cash to rebalance/purchase to (what I perceive) as a less volatile investment trust..Even though I would have sold one set of stock to buy another set..I would not be due any capital gains tax liabilities from the profit of the first stock, due the monies having not left the overarching share account vehicle?

eskbanker

vivvov wrote: »

Thanks for the replies

So, for example, am I correct in thinking that if I sell a certain amount of shares in the share dealing account (not the S and S ISA account)..keep the released cash in the share account..then use this cash to rebalance/purchase to (what I perceive) as a less volatile investment trust..Even though I would have sold one set of stock to buy another set..I would not be due any capital gains tax liabilities from the profit of the first stock, due the monies having not left the overarching share account vehicle?

No, as soon as you sell shares, this crystallises the gain and becomes liable for CGT at that point, if exceeding your annual allowance of £12K - what you subsequently do with the proceeds doesn't make any difference to this.

bowlhead99

eskbanker wrote: »

vivvov wrote: »

Even though I would have sold one set of stock to buy another set..I would not be due any capital gains tax liabilities from the profit of the first stock, due the monies having not left the overarching share account vehicle?

No, as soon as you sell shares, this crystallises the gain and becomes liable for CGT at that point, if exceeding your annual allowance of £12K - what you subsequently do with the proceeds doesn't make any difference to this.

Basically, owning shares that happen to be worth more than you paid for them when you get to the end of a year, does not count as a gain for CGT.

Selling the shares for more than you paid for them, is what makes it a gain for CGT, even if you go and invest in something else with the proceeds.

If the 'overarching share account vehicle' is a ISA, all gains and losses are ignored.

If the 'overarching share account vehicle' is a general investment account instead of something in a tax wrapper (ISA or pension) the gains are not ignored, even if you keep them in the account. They are still gains. But the first £12000 of gains made in a tax year will fit inside your annual exempt amount, and you are also allowed to net your claimed realised capital losses against realised capital gains before computing the tax due.

AnotherJoe

vivvov wrote: »

Do I just simply sell just under £12k's worth of Investments and cash it out to my current account in this tax year in order to avoid CGT on shares liability?

No, unless the shares cost 1p in which case I'd like to get some tips from you.
It's £12k GAINS not sales.