Learning about Stocks & Shares

eskbanker

Steveg6 said:

I have only just started my journey in the stock market (  using trading212 ) , so far so good. However I was wondering if anyone can clarify the situation regarding capital gains and when one has to pay it. I understand that we have an annual allowance of £12.3k , so no worries there.  My understanding is that you only pay the capital gains ( assuming you have exceeded the threshold ) once you actually realise the gains and that gain/profit is transferred back into your bank account. 
If i then sell my shares but i dont actually withdraw my money back to my account, i just leave the money/gains form the sale of those shares in my trading account and dont actually withdraw it ( so for example i decide to reinvest into other stocks ) , do i still need to pay capital gains on this or is it only once i have received the money back to my account ?

CGT liability isn't dependent on removing sale proceeds from a trading account to a bank account, it's the act of selling in the first place that counts as an asset disposal for CGT purposes.

Steveg6

eskbanker said:

Steveg6 said:

I have only just started my journey in the stock market (  using trading212 ) , so far so good. However I was wondering if anyone can clarify the situation regarding capital gains and when one has to pay it. I understand that we have an annual allowance of £12.3k , so no worries there.  My understanding is that you only pay the capital gains ( assuming you have exceeded the threshold ) once you actually realise the gains and that gain/profit is transferred back into your bank account. 
If i then sell my shares but i dont actually withdraw my money back to my account, i just leave the money/gains form the sale of those shares in my trading account and dont actually withdraw it ( so for example i decide to reinvest into other stocks ) , do i still need to pay capital gains on this or is it only once i have received the money back to my account ?

CGT liability isn't dependent on removing sale proceeds from a trading account to a bank account, it's the act of selling in the first place that counts as an asset disposal for CGT purposes.

forgive my ignorance , is the 12.3k threshold per tax year or calendar year , or otherwise? 

NottinghamKnight

Steveg6 said:

eskbanker said:

Steveg6 said:

I have only just started my journey in the stock market (  using trading212 ) , so far so good. However I was wondering if anyone can clarify the situation regarding capital gains and when one has to pay it. I understand that we have an annual allowance of £12.3k , so no worries there.  My understanding is that you only pay the capital gains ( assuming you have exceeded the threshold ) once you actually realise the gains and that gain/profit is transferred back into your bank account. 
If i then sell my shares but i dont actually withdraw my money back to my account, i just leave the money/gains form the sale of those shares in my trading account and dont actually withdraw it ( so for example i decide to reinvest into other stocks ) , do i still need to pay capital gains on this or is it only once i have received the money back to my account ?

CGT liability isn't dependent on removing sale proceeds from a trading account to a bank account, it's the act of selling in the first place that counts as an asset disposal for CGT purposes.

forgive my ignorance , is the 12.3k threshold per tax year or calendar year , or otherwise? 

Tax year. 

bowlhead99

Steveg6 said:

 My understanding is that you only pay the capital gains ( assuming you have exceeded the threshold ) once you actually realise the gains and that gain/profit is transferred back into your bank account.  

No, that's incorrect. If you've sold assets for more than you paid for them, it doesn't matter whether your broker has transferred the sales proceeds back to your personal bank account or kept them in the investment account. You have still sold the assets and still made the profit, so that's what's relevant for your tax. Whether you then choose to reinvest the proceeds into something else at Trading212, or move the money back to your own account, or just keep the cash idle in the 212 account doing nothing, does not change the fact that you made a gain and may owe tax on it if it exceeds your exemption and allowable losses.

If i then sell my shares but i dont actually withdraw my money back to my account, i just leave the money/gains form the sale of those shares in my trading account and dont actually withdraw it ( so for example i decide to reinvest into other stocks ) , do i still need to pay capital gains on this or is it only once i have received the money back to my account ?

You need to pay tax if you make gains which exceed the losses you made by an amount that isn't fully covered by your annual £12300 exemption.  In practice you don't actually have to pay the tax in real time as you make the profit, you settle up after the tax year is over and you have your final figures. But if you owe tax on your gains it doesn't make a difference to HMRC whether the proceeds of the gain are sitting in your account at Trading 212 or your bank account at Lloyds or Barclays or HSBC etc. You don't avoid tax being due by keeping the money in the investment platform.

AlanP_2

You are also liable for income tax on the dividends received as well, whether they are automatically reinvested by using accumulator type funds or paid in to your trading account. Like CGT there are annual "tax free" limits but you need to monitor your own situation.

Alternatively, use an ISA wrapper and avoid all this hassle.

BananaRepublic

Steveg6 said:

I have only just started my journey in the stock market (  using trading212 ) , so far so good. However I was wondering if anyone can clarify the situation regarding capital gains and when one has to pay it. I understand that we have an annual allowance of £12.3k , so no worries there.  My understanding is that you only pay the capital gains ( assuming you have exceeded the threshold ) once you actually realise the gains and that gain/profit is transferred back into your bank account. 
If i then sell my shares but i dont actually withdraw my money back to my account, i just leave the money/gains form the sale of those shares in my trading account and dont actually withdraw it ( so for example i decide to reinvest into other stocks ) , do i still need to pay capital gains on this or is it only once i have received the money back to my account ?

You are liable for CGT as soon as you realise a gain, so it’s the sale date, or more precisely the date on which you agree the contract to sell. 

If you sell, then immediately use the proceeds to buy more shares, you still become liable to CGT subject to your annual CGT allowance. The subsequent purchase is irrelevant. 

However, if you sell shares within an ISA, gains are tax free, of course. 

sevenhills

Cptralls said:

Any information and guidance would be gratefully received. 

I dont know if this is typical, but from my £8,000 worth of shares(10 different companies), I get around £10 per month in dividend payments.

C_Mababejive

Not read the full thread but i shall share my pearls of wisdom as an amateur investor of several decades;

Always seek to shelter your investments from current taxation in an ISA or pension

Almost never buy individual shares unless they are a screaming bargain.

Buy collective investments such as funds ,ETFs or ITs.

Seek to buy low !

Dont panic sell without a solid reason

Remember that the investment world exists outside of the UK some global investments are a must

If you cant manage or dont want the hassle,buy into a mixed investment fund and let the experts manage it for you

Keep a good eye on taxation both for now and in the future eg CGT,IHT etc. 

Think and plan well ahead for HMRC tax returns to minimise tax