Capital gains washing out the base cost on index funds to utilise the personal allowance every year

NottinghamMan

Tassie_Devil said:

Just looked on Vanguard's UK site and here it is:

Under where it says LifeStrategy is a dropdown menu "Available in other share classes".

Thanks for that, I've found it now, not easy to see unless anyone tells u. I've checked performance figures & exactly the same, I wonder if HMRC would class this as a sale & fresh buy cause may be same fund. Although prices are different. And percentages in tracker funds are very slightly different.
And I think now looking closely, Vanguard expect u to do this, as before when I tested a switch, it bought up what I thought was the same fund, but now looking closely after your words, the 1st fund it gives u is the Income one of the same fund. Brilliant, was right in front of me all that time.
But the income classes of all the others aren't in the other buy sections when u come to switch. I'll report this back to Vanguard as they admit they have lots of glitches since allowing SIPP's last year.

NottinghamMan

danm said:

NottinghamMan said:

your base costs are independent. My purchase of Vanguard has done nothing to the base cost on my HSBC funds....
if anything (and i am by no means an expert) - it probably makes it simpler in the scenario where you wait 30 days and then reinvest back into the exact same fund; that will impact how you next work out your gain if only selling part of the holding. 

Thanks,
I'm gonna' ask the new two funds base cost question in a separate post I think to see if anyone knows.

NottinghamMan

eskbanker said:

NottinghamMan said:

Aah, so so the current trading price will always be higher than current base cost, so always going to be better to reset even if fund price has dropped that year. 

No, not always.  If your wife sold her entire holding now and repurchased, then her new base cost will be the same as the Feb 2021 trading price if she doesn't buy any more units between now and next year's decision point, so a fall in trading price by Feb 2022 would affect that decision.  However, resets that don't involve complete sale and repurchases, or further purchases during the year, could deliver a different outcome, so my point is that you have to work out each year whether or not to reset, based on the numbers at the time, using the right ones for that analysis.

Yes I get that if no rise, or even a fall. But better to reset if normally a rise every year. 
Now this is gonna' complicate me even more ha ha 'ou have to work out each year whether or not to reset, based on the numbers at the time, using the right ones for that analysis.'

NottinghamMan

My next question if anyone can help, I think I would prefer the idea of leaving the sold amount in the alternative fund for the year & then say March 2022, I now have two very similar funds, when I come to reset the base cost then, what is the formula for doing two funds?
ie. So probably selling maybe 100k in one fund & 80k in the other to use up the max personal allowance £12,300 between the two funds. So in theory we'd be swapping different amounts between two funds I guess unless anyone tells me that's a No No.
I know the one fund formula is:
The capital gain allowance ie. currently £12300 divide that by the gain from today's price per unit to Average price per unit.
That gives me the amount of units I need to sell which multiplied by today's unit price is the £'s figure I need to sell.

eskbanker

NottinghamMan said:

My next question if anyone can help, I think I would prefer the idea of leaving the sold amount in the alternative fund for the year & then say March 2022, I now have two very similar funds, when I come to reset the base cost then, what is the formula for doing two funds?
ie. So probably selling maybe 100k in one fund & 80k in the other to use up the max personal allowance £12,300 between the two funds. So in theory we'd be swapping different amounts between two funds I guess unless anyone tells me that's a No No.
I know the one fund formula is:
The capital gain allowance ie. currently £12300 divide that by the gain from today's price per unit to Average price per unit.
That gives me the amount of units I need to sell which multiplied by today's unit price is the £'s figure I need to sell.

This is another one without a simple one-size-fits-all answer!  If you have two funds and wish to sell enough to use up your annual CGT allowance, there will be almost infinite permutations delivering that, i.e. selling enough units of fund A to crystallise a £12,300 gain, or selling enough units of fund B to do so, or any combination of the two that sums to £12,300.  If you don't have enough units of A or B to realise the full £12,300 by themselves then there will be fewer permutations but the point remains that it's an equation with many solutions rather than one.

NottinghamMan

eskbanker said:

NottinghamMan said:

My next question if anyone can help, I think I would prefer the idea of leaving the sold amount in the alternative fund for the year & then say March 2022, I now have two very similar funds, when I come to reset the base cost then, what is the formula for doing two funds?
ie. So probably selling maybe 100k in one fund & 80k in the other to use up the max personal allowance £12,300 between the two funds. So in theory we'd be swapping different amounts between two funds I guess unless anyone tells me that's a No No.
I know the one fund formula is:
The capital gain allowance ie. currently £12300 divide that by the gain from today's price per unit to Average price per unit.
That gives me the amount of units I need to sell which multiplied by today's unit price is the £'s figure I need to sell.

This is another one without a simple one-size-fits-all answer!  If you have two funds and wish to sell enough to use up your annual CGT allowance, there will be almost infinite permutations delivering that, i.e. selling enough units of fund A to crystallise a £12,300 gain, or selling enough units of fund B to do so, or any combination of the two that sums to £12,300.  If you don't have enough units of A or B to realise the full £12,300 by themselves then there will be fewer permutations but the point remains that it's an equation with many solutions rather than one.

Aaahhh u say 'infinite permutations'. That's me stuffed on that then.
I thought so, not simple then. So at moment I MUST go from Accumulation to Income & then back after the 30 days. That's the great thing about u guys on this Forum, there has been some very good solutions. To what could potentially save my family make-up dozens & maybe hundreds of thousands of pounds in tax in 10 to 15 years.
So again if anyone knows of a Financial Adviser that you're allowed to say on here or private messaging if this site allows, please send me. As having someone work this out for me once a year, could save me big headache every March. 

eskbanker

NottinghamMan said:
So at moment I MUST go from Accumulation to Income & then back after the 30 days.

Not necessarily, you can switch from Acc to Inc and leave it there for a year before switching back as all or some of next year's reset - if you reinvest the dividends then the overall performance will be the same for both variants of the fund, assuming no dealing costs.

danm

have you actually tried to put this on a spreadsheet?
The questions you are asking a perfectly sensible, but i think in your head you have convinced yourself its more complicated than it actually is.

NottinghamMan

eskbanker said:

NottinghamMan said:
So at moment I MUST go from Accumulation to Income & then back after the 30 days.

Not necessarily, you can switch from Acc to Inc and leave it there for a year before switching back as all or some of next year's reset - if you reinvest the dividends then the overall performance will be the same for both variants of the fund, assuming no dealing costs.

But if I switch just enough for the Cap Gain allowance, & I then leave it for a year, I'm then in the realms of 2 Cap Gains to work out, have I not? If say both have gone up by 7%. Whereas if I switch back after 30 days, less chance of too much a gain & then next year I still have only the one fund to reset again.

NottinghamMan

danm said:

have you actually tried to put this on a spreadsheet?
The questions you are asking a perfectly sensible, but i think in your head you have convinced yourself its more complicated than it actually is.

No, I had someone set up my Excel spreadsheets for adding up etc. for my business books, as don't laugh, I've had enough of learning what I don't need to learn any more, so I wun't have a clue how to do spreadsheet for this. 
Eskbanker taught me the formula last 2 weeks, & I've got that now, but doing it for 2 different funds would wreck my brain. I'd be better spending 2 hours on my business what I'm quick & good at & earning my money there to then pay someone what their good at ie. working this formula out. 
I had convinced myself one fund resetting to base cost was beyond my realms, but I think I've got that, but two funds seems Way out there for me. I'm happy to be corrected or pointed in the way of some spreadsheet somewhere. I always say U only know when someone tells u.