Capital gain on 20 year old shares, how on earth can I calculate it correctly?

vacheron

Mickey666 said:

I agree with the OP that it becomes very complicated to calculate CGT liability on disposal.
However, it's possible avoid the issue altogether by only selling amounts below the annual CGT allowance. 
In this way, even if the sale proceeds are 100% profit (which they won't be, but you get the gist) there can be no CGT to pay, and because there is no CGT to pay there's nothing to declare.

I appreciate this approach is not applicable if you want to dispose of an amount over the CGT allowance but it's worth considering.  It's also possible to transfer shares to a spouse with no tax implications, so can utilise their CGT allowance and if you sell around March/April the disposal can be split across tax years.  In this way it's possible to sell around £49k of shares with zero CGT liability and nothing to declare.

That is certainly the way I would have liked to have gone about it in the past. There are a couple of problems though in my current situation:

1: The SAYE shares I have just been granted are currently valued at approximately £80k of which £50k will be capital gain.
Half have been issued in my wife's name for the reason you mentioned above. so we have 2 lots of CGT allowance available this year. I have a spreadsheet so I can easily enter the price when I come to sell and it tells me exactly how many SAYE shares I would be able to sell to stay under the CGT limit. This is easy to do for my wife as she has her full CGT allowance, but I now have this silly Prudential sale reducing my allowance by "an amount that is complicated to calculate" this year which I need to take into consideration. 

As bowhead also added, I can "Bed and ISA" some, but I don't believe that my wife would be able to under the rules?

2: Normally, as you mentioned, you would think, "no problem, I'll err on the side of caution and ditch most of the rest in April, however there are also now lots of reports of Mr Sunak looking into the CGT allowance for shares and possibly increasing the tax bands to match PAYE and / or reducing the CGT allowance down to as little as £2K per year. If this came into force for 2021/22 it could prove very costly and/or take years to dispose of the balance while remaining under any new CGT threshold!

A side consideration I am having today is should I sell before Joe Bidens inauguration this afternoon or wait in the hope that the US responds well which we may see here when tomorrows market opens?

I appreciate these are very "first world" problems to have, but they also bring up a lot of interesting considerations and discussion like this.   

bowlhead99

vacheron said

A side consideration I am having today is should I sell before Joe Bidens inauguration this afternoon or wait in the hope that the US responds well which we may see here when tomorrows market opens?

Do you think the market is not aware of the fact that president-elect Biden will be inaugurated as actual president this afternoon and so hasn't bothered to already update company valuations accordingly?

vacheron

bowlhead99 said:

vacheron said

A side consideration I am having today is should I sell before Joe Bidens inauguration this afternoon or wait in the hope that the US responds well which we may see here when tomorrows market opens?

Do you think the market is not aware of the fact that president-elect Biden will be inaugurated as actual president this afternoon and so hasn't bothered to already update company valuations accordingly?

Haha, of course . But I have also read a few articles that show that almost (if not every) new presidency generally results in a lift in share prices, both between election and inauguration, and also during the first 100 days of the new presidential term, so not "quite" as silly a question as it could initially appear. 

Mickey666

vacheron said:

Mickey666 said:

I agree with the OP that it becomes very complicated to calculate CGT liability on disposal.
However, it's possible avoid the issue altogether by only selling amounts below the annual CGT allowance. 
In this way, even if the sale proceeds are 100% profit (which they won't be, but you get the gist) there can be no CGT to pay, and because there is no CGT to pay there's nothing to declare.

I appreciate this approach is not applicable if you want to dispose of an amount over the CGT allowance but it's worth considering.  It's also possible to transfer shares to a spouse with no tax implications, so can utilise their CGT allowance and if you sell around March/April the disposal can be split across tax years.  In this way it's possible to sell around £49k of shares with zero CGT liability and nothing to declare.

That is certainly the way I would have liked to have gone about it in the past. There are a couple of problems though in my current situation:

1: The SAYE shares I have just been granted are currently valued at approximately £80k of which £50k will be capital gain.
Half have been issued in my wife's name for the reason you mentioned above. so we have 2 lots of CGT allowance available this year. I have a spreadsheet so I can easily enter the price when I come to sell and it tells me exactly how many SAYE shares I would be able to sell to stay under the CGT limit. This is easy to do for my wife as she has her full CGT allowance, but I now have this silly Prudential sale reducing my allowance by "an amount that is complicated to calculate" this year which I need to take into consideration. 

As bowhead also added, I can "Bed and ISA" some, but I don't believe that my wife would be able to under the rules?

2: Normally, as you mentioned, you would think, "no problem, I'll err on the side of caution and ditch most of the rest in April, however there are also now lots of reports of Mr Sunak looking into the CGT allowance for shares and possibly increasing the tax bands to match PAYE and / or reducing the CGT allowance down to as little as £2K per year. If this came into force for 2021/22 it could prove very costly and/or take years to dispose of the balance while remaining under any new CGT threshold!

A side consideration I am having today is should I sell before Joe Bidens inauguration this afternoon or wait in the hope that the US responds well which we may see here when tomorrows market opens?

I appreciate these are very "first world" problems to have, but they also bring up a lot of interesting considerations and discussion like this.   

Fair points, and there is always the balance between 'needing' to sell a large amount and wanting to minimise CGT.
As for what Mr Sunak may or may not do, that's just another variable to contend with along with all the others involved with investments.
However, I think we can be fairly sure that Biden's inauguration today will not affect the markets this week as this event has been known about for a few weeks now, even allowing for the initial fiasco over their election results, so there should be no immediate surprise around today.  Going forward is anyone's guess

yorkie2021

However, I think we can be fairly sure that Biden's inauguration today will not affect the markets this week as this event has been known about for a few weeks now, even allowing for the initial fiasco over their election results, so there should be no immediate surprise around today.  Going forward is anyone's guess

I suppose it depends on how successful he is getting his agenda through the Senate.