CGT and Accumulation units

danm

Hi all 
Quick question for the various brain trusts on the forum. 
Mrs Danm does not work. Income is from investment and savings only. She does not go over her personal allowance
In her GIA she hold a number of broad index funds - accumulation. 
I had a lightbulb moment that while income tax is not due - it may make sense at some point to crystalise gains to use her CGT allowance. I would do this by for example Selling HSBC global strategy Dynamic and buying Vanguard LS 80% - pretty sure there is nothing to stop me doing this. 
Question i have is; for Accumulation funds, how do i 'back out' dividends to get a true picture of the capital gain?
(Lesson i think here to hold Inc units in GIA accounts !)
thanks
Dan

moneysavinghero

The capital gain is the difference between the purchase cost and the selling value. You don't need to know how much dividends have been accumulated.

Linton

moneysavinghero said:

The capital gain is the difference between the purchase cost and the selling value. You don't need to know how much dividends have been accumulated.

Is this true?  I thought Acc fund reinvested dividends were taxed in the same way as Inc ones.  That is why you get tax statements for Acc funds.  So you should not be paying CGT on the increase in your Acc fund arising purely from the added dividends.

See https://monevator.com/income-tax-on-accumulation-unit . This dates form 2011, so I guess it is possible that things have changed since.

danm

Linton said:

moneysavinghero said:

The capital gain is the difference between the purchase cost and the selling value. You don't need to know how much dividends have been accumulated.

Is this true?  I thought Acc fund reinvested dividends were taxed in the same way as Inc ones.  That is why you get tax statements for Acc funds.  So you should not be paying CGT on the increase in your Acc fund arising purely from the added dividends.
.

my thoughts exactly. thanks for this link - will check it out.

coyrls

Don't you get a consolidated tax statement from your platform for each tax year?

EthicsGradient

The basic way to work out the capital gains is to add up the initial investment, any subsequent top-ups, and the reported income assigned to the accumulation units (but not, if this is an OEIC, the part marked "equalization" in the first reporting period after purchasing), until you sell some of it. You then work out the average cost of the units, and that then tells you the capital gain on what you sell, and also the cost to use for the remaining units. You then add to that remaining cost the reported income after that, until you sell some more again.

So you might have:
100 units bought @£2.50 = £250
1st year's accumulated income = £4
30 units bought @£3.00 = £90
2nd year's accumulated income = £6
total cost = 250+4+90+6 = £350.00 for 130 units = £2.69/unit
50 units sold @£3.50; gain = (3.5*50) - (2.69*50) = £40.38
cost of remaining 80 units = 80*2.69 = £215.38
3rd year's accumulated income = £4
...

danm

Thanks mate, this is very helpful.