Post-CGT Allowance Tax on Trading 212 Stock and ETF trading (Bed to ISA)

JazzJohannes

Hi guys,

I was wondering, I am full-time employed and earn above £12,500 per year, and thought it'd be a good idea to invest in stock on the trading app "Trading 212", however I just read up on tax in that matter and am feeling quite discouraged. At this moment in time I only have like £36 or so in stock. I have instructed this app to sell all my shares tomorrow when trading reopens, because I am scared about the tax implications. I do not feel comfortable having to project any earnings that I make from "trading", because quite frankly I have a now £15,000 worth private company student loan from Germany to pay back and do not want to worry about this tax thing, as it is too volatile for my current debt situation I believe.

Am I doing the right thing here? What is a bed to ISA? If I have already maxed out my CGT allowance, do I need to pay tax if I sell and transfer all my stock sale profit into the "Trading 212 ISA" that I also have? Is that what bed to ISA means? Not having to pay tax on anything you trade stock on and put back into an ISA as long as it is below the £20,000 ISA allowance? (I have a separate ISA with RBS but only £0.01 in it).

Please help... I found it a nice hobby to do stock trading and it is certainly better than paying the lottery all the time, but if it's getting that complicated with taxes etc., I'd rather just put it into an actual ISA or my NEST pension tbh.


Thanks

Swipe

You need to sell shares and make more than £12300 gains on them to be eligible for CGT? Is this something you have done via another trading account? A bed and ISA is simply selling up to £20K worth of shares and then transferring the cash to an Isa.

JazzJohannes

Thanks for your reply. I'm simply full time employed that's why I will have gone over £12300 at the end of this new tax year. Do I still need to pay tax on my stock trades even if I transfer it into an ISA?

Swipe

JazzJohannes said:

Thanks for your reply. I'm simply full time employed that's why I will have gone over £12300 at the end of this new tax year. Do I still need to pay tax on my stock trades even if I transfer it into an ISA?

You are confusing the £12300 CGT allowance with your £12500 Income Tax personal allowance. They are two different things. You've have to sell a hell of a lot of profitable shares in a 12 month period to go over your CGT allowance. To answer your question, assuming your ISA with the RBS containing £0.01 is either a current tax year cash ISA or a S&S ISA from a previous tax year, you should sell your shares or just keep them and open a separate S&S shares ISA with your Trading 212.

JazzJohannes

THANKS SOO MUCH Swipe!!!! I love this forum, and thank you so much again. I was so worried that I did mistake there. But you can see how this could get confusing right? Because CGT and income tax allowance are almost the same amount hehehe. I can keep my hobby then hehehe. So just to clarify, if I do not go above the £12,300 CGT in a tax year then I do not have to pay tax right? Or if not, to prevent having to declare it to HMRC, I'd have to transfer my profits from the stock trading into my Trading 212 ISA account right?

Swipe

JazzJohannes said:

So just to clarify, if I do not go above the £12,300 CGT in a tax year then I do not have to pay tax right? Or if not, to prevent having to declare it to HMRC, I'd have to transfer my profits from the stock trading into my Trading 212 ISA account right?

You'd only need to inform HMRC if you sold shares in a tax year and the gains from those share sales exceeded £12300 or the dividends received in a given tax year exceeded £2000. You would still need to keep detailed records of transactions though to be able to determine this. This is why it's better to run the trading account under an ISA, then you can completely forget about HMRC providing you don't deposit more than £20K in to the account in a tax year.

lescarp88

Interesting info. Do I still need to declare any gains from investments outside an ISA? (even if under £12,300 in dividends). I was also wondering if holding a Gold ETF outside an ISA has any complications?

Swipe

lescarp88 said:

Interesting info. Do I still need to declare any gains from investments outside an ISA? (even if under £12,300 in dividends). I was also wondering if holding a Gold ETF outside an ISA has any complications?

The £12,300 allowance is for capital gains. The annual allowance for dividends is only £2000.

ColdIron

With unwrapped ETFs you need to consider Excess Reportable Income as well as capital gains and dividends. I'd learn to walk before you run if I was you

https://monevator.com/excess-reportable-income/