Tesco illegal shares rip off?

Croeso69

HHarry said:

According to the e-mail I received from Hargreaves Lansdown you can vote against the proposal, so do that if it causes you so much grief.

If you’ve got nearly £500k worth of Tesco shares, a £600 tax hit is nothing - Sure it’s annoying to realise a loss not of your making, but realistically a portfolio that size is going to swing by more than £600 in a normal days trading.

Also it can’t be a rip-off as Tesco haven’t implemented that tax, nor have any control over it.  If it causes you a problem have a chat with the Chancellor, he’s the one with the legal authority to amend it.

£500,000 Tesco = 250,000 shares approximately.

250,000 x 0.50 = £125,000

Dividend tax on that is £9,375 for a basic rate taxpayer and £40,625 for a 40% taxpayer (assuming the £2,000 dividend allowance already used up - likely if you hold £500,000 in Tesco).

Quite a bit more than £600 really.

Apodemus

Croeso69 said:

HHarry said:

According to the e-mail I received from Hargreaves Lansdown you can vote against the proposal, so do that if it causes you so much grief.

If you’ve got nearly £500k worth of Tesco shares, a £600 tax hit is nothing - Sure it’s annoying to realise a loss not of your making, but realistically a portfolio that size is going to swing by more than £600 in a normal days trading.

Also it can’t be a rip-off as Tesco haven’t implemented that tax, nor have any control over it.  If it causes you a problem have a chat with the Chancellor, he’s the one with the legal authority to amend it.

£500,000 Tesco = 250,000 shares approximately.

250,000 x 0.50 = £125,000

Dividend tax on that is £9,375 for a basic rate taxpayer and £40,625 for a 40% taxpayer (assuming the £2,000 dividend allowance already used up - likely if you hold £500,000 in Tesco).

Quite a bit more than £600 really.

The OP made a mistake in their initial posting where they had an extra 0 on the value of the holding, citing it as £484000 instead of £48,400 (still a silly amount to have in Tesco shares in my opinion, for someone that is concerned about £600 in tax).   But this is why HHarry mentioned the £500k holding and £600 tax. 

steampowered

wackojackouk said:

I am a Tesco shareholder as I inherited some shares when my late mother passed away a few years ago.

I have approximately 8800 shares which was for a rainy day/new car/towards our new house purchase (hopefully going through this month).

It would be advisable to consider selling your shares in Tesco, in favour of a more diversified investment, such as a suitable investment fund which splits its money across many different companies.

It is generally considered very high risk to be holding all of your shares in a single company.

That could also be an opportunity to move some of your money into an ISA wrapper, assuming you have not fully used your Stocks & Shares ISA allowance for this year, where no tax will be payable.

wackojackouk

Thanks @steampowered - Definitely something I will be looking into once our house move is sorted.

moneysavinghero

You own 20,000 shares worth £48,400.
The special dividend will pay you £10,186.
You will pay tax of £613.95
You will then own 15,789 shares worth £48,400
So you have actually made £9572.05, not a rip off at all.
You will still own exactly the same chunk of Tesco as you did before, no need to buy more shares. Yes you will own less shares, but the shares will increase in price so that they are worth the same as before.

green_man

moneysavinghero said:

You will still own exactly the same chunk of Tesco as you did before, no need to buy more shares. Yes you will own less shares, but the shares will be worth more than they were before.

I suspect that will not be the case.  It looks like around 20% of the value of the business is being given out in cash/divs.  I would expect the OPs remaining shares to be worth something around £38k. Same as when shares go ex dividend and there is a corresponding drop in share price.

MarkCarnage

In theory, and other things being equal, the value of the lower number of new shares, plus the special cash dividend, should equal what the old shares were worth before the event. In practice, there will be some tax implications for some, and the share price may rise or fall (after allowing for the arithmetical adjustment resulting from the stock reorganisation) either due to normal market movement, or because investors like/don't like the strategic changes. 
The share price movement is structurally similar in principle to what happens if there is a rights issue/scrip issue. In this case if the special dividend had just been paid on its own, the share price would fall to reflect that as it would with any xd event. However, for some reason Tesco want the price to be about the same so have reduced the number of shares in issue.  

jimpwarsop

I hold Tesco and there will be a tax cost. Is the ex-dividend date(15/2/2021) the effective date for tax purposes?

Cheers.

LobsterMemory

jimpwarsop said:

I hold Tesco and there will be a tax cost. Is the ex-dividend date(15/2/2021) the effective date for tax purposes?

Cheers.

No, it's the payment date 

jimpwarsop

LobsterMemory said:

jimpwarsop said:

I hold Tesco and there will be a tax cost. Is the ex-dividend date(15/2/2021) the effective date for tax purposes?

Cheers.

No, it's the payment date 

Thanks, I'll be shifting them in good time.  My concern was that it might be earlier.