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

eskbanker

NottinghamMan said:

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.

I was just highlighting that "I MUST go from Accumulation to Income & then back after the 30 days" is solely a constraint you'd invented rather than something actually being forced on you, so you can do that if you wish but you don't have to....

NottinghamMan

eskbanker said:

NottinghamMan said:

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.

I was just highlighting that "I MUST go from Accumulation to Income & then back after the 30 days" is solely a constraint you'd invented rather than something actually being forced on you, so you can do that if you wish but you don't have to....

I wun't say invented, I'd say cause I don't know the formula for two funds, for me it seems better to go in very similar fund for 30 days & back again, so 2022, just one fund to reset the base cost. But I'm happy to be corrected by u with more knowledge than me. But don't forget, I haven't got a clue how to reset more than one fund. 

eskbanker

NottinghamMan said:

eskbanker said:

NottinghamMan said:

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.

I was just highlighting that "I MUST go from Accumulation to Income & then back after the 30 days" is solely a constraint you'd invented rather than something actually being forced on you, so you can do that if you wish but you don't have to....

I wun't say invented, I'd say cause I don't know the formula for two funds, for me it seems better to go in very similar fund for 30 days & back again, so 2022, just one fund to reset the base cost. But I'm happy to be corrected by u with more knowledge than me. But don't forget, I haven't got a clue how to reset more than one fund. 

I'm really not trying to cajole you into doing something you're not comfortable with, but worth bearing in mind that if you're making two sets of sale/purchase transactions 30 days apart, that already forces you to make multiple CGT calculations, in that the fund you hold for 30 days is almost guaranteed to move one way or the other, thereby creating a second taxable gain or loss (which may take you from one side of the annual threshold to the other) - if you'd been conducting this exercise exactly a year ago, the price movements in the 30 days after 23 February 2020 would have been way more significant than what had happened in the previous year!

NottinghamMan

eskbanker said:

NottinghamMan said:

eskbanker said:

NottinghamMan said:

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.

I was just highlighting that "I MUST go from Accumulation to Income & then back after the 30 days" is solely a constraint you'd invented rather than something actually being forced on you, so you can do that if you wish but you don't have to....

I wun't say invented, I'd say cause I don't know the formula for two funds, for me it seems better to go in very similar fund for 30 days & back again, so 2022, just one fund to reset the base cost. But I'm happy to be corrected by u with more knowledge than me. But don't forget, I haven't got a clue how to reset more than one fund. 

I'm really not trying to cajole you into doing something you're not comfortable with, but worth bearing in mind that if you're making two sets of sale/purchase transactions 30 days apart, that already forces you to make multiple CGT calculations, in that the fund you hold for 30 days is almost guaranteed to move one way or the other, thereby creating a second taxable gain or loss (which may take you from one side of the annual threshold to the other) - if you'd been conducting this exercise exactly a year ago, the price movements in the 30 days after 23 February 2020 would have been way more significant than what had happened in the previous year!

I agree on the 30 days & the movement, but I'm hoping the movement not an awful lot. So I'm happy for u to teach me the two funds formula or point me to someone who can do this for me once a year. 
Yes I know the falls in March 2020, I was down an awful lot that month. As we know, recovered and up even more now.
I got a few mates to start pensions Feb 2020 drip feeding & they've not done bad this year starting at the low times. 

eskbanker

NottinghamMan said:

eskbanker said:

I'm really not trying to cajole you into doing something you're not comfortable with, but worth bearing in mind that if you're making two sets of sale/purchase transactions 30 days apart, that already forces you to make multiple CGT calculations, in that the fund you hold for 30 days is almost guaranteed to move one way or the other, thereby creating a second taxable gain or loss (which may take you from one side of the annual threshold to the other) - if you'd been conducting this exercise exactly a year ago, the price movements in the 30 days after 23 February 2020 would have been way more significant than what had happened in the previous year!

I agree on the 30 days & the movement, but I'm hoping the movement not an awful lot. So I'm happy for u to teach me the two funds formula or point me to someone who can do this for me once a year. 

I'm not sure exactly what you mean by 'the two funds formula' but for any fund you hold at any time, you need to know what the base unit cost of your holding in that fund is.

Every time you buy any more units you need to know how to (re)calculate that, and every time you're considering selling, you need to work out your chargeable gain as <units> x (<sale price> - <base cost>), but this isn't any easier or harder if the gain is large or small, and it's exactly the same process whether you hold a fund for a day, 30 days, a year or multiple years!

As your holdings grow, you'll inevitably have holdings in multiple funds, even if just temporarily for 30 days, as you won't be wanting to sell everything and exceed your CGT allowance, so you need to get to grips with the concept of repeating these formulae for multiple holdings,

Personally I'd have thought it was a bit simpler to only make one sale per year, which also gives you the best chance of optimising your CGT, but if you're comfortable doubling up then that's perfectly valid if you're happy that you can manage that.  To answer your question about advisers, I don't know of any but suspect that whoever takes care of your company accounts should find it simple to run CGT calculations for you - it seems to me it's more of an arithmetic issue than a financial advice one as such....

Eco_Miser

One thing you must not do if you've got two funds A and B is switch from fund A to fund B, to rebase A, and then switch from the original holding of fund B to fund A to rebase B within 30 days of the first switch.

NottinghamMan

eskbanker said:

NottinghamMan said:

eskbanker said:

I'm really not trying to cajole you into doing something you're not comfortable with, but worth bearing in mind that if you're making two sets of sale/purchase transactions 30 days apart, that already forces you to make multiple CGT calculations, in that the fund you hold for 30 days is almost guaranteed to move one way or the other, thereby creating a second taxable gain or loss (which may take you from one side of the annual threshold to the other) - if you'd been conducting this exercise exactly a year ago, the price movements in the 30 days after 23 February 2020 would have been way more significant than what had happened in the previous year!

I agree on the 30 days & the movement, but I'm hoping the movement not an awful lot. So I'm happy for u to teach me the two funds formula or point me to someone who can do this for me once a year. 

I'm not sure exactly what you mean by 'the two funds formula' but for any fund you hold at any time, you need to know what the base unit cost of your holding in that fund is.

Every time you buy any more units you need to know how to (re)calculate that, and every time you're considering selling, you need to work out your chargeable gain as <units> x (<sale price> - <base cost>), but this isn't any easier or harder if the gain is large or small, and it's exactly the same process whether you hold a fund for a day, 30 days, a year or multiple years!

As your holdings grow, you'll inevitably have holdings in multiple funds, even if just temporarily for 30 days, as you won't be wanting to sell everything and exceed your CGT allowance, so you need to get to grips with the concept of repeating these formulae for multiple holdings,

Personally I'd have thought it was a bit simpler to only make one sale per year, which also gives you the best chance of optimising your CGT, but if you're comfortable doubling up then that's perfectly valid if you're happy that you can manage that.  To answer your question about advisers, I don't know of any but suspect that whoever takes care of your company accounts should find it simple to run CGT calculations for you - it seems to me it's more of an arithmetic issue than a financial advice one as such....

If the funds I've sold to reset the base cost, I put these funds into a 2nd fund, & I don't buy back into the 1st fund after 30 days (to keep simple having one fund), so now going forward I have two very similar funds (Acc & Inc), u mentioned then that the working out on bases costs for two funds (Formula my word) is then not straightforward (for the likes of me).
I will know what base (average) cost is as Vanguard show this very clearly.

Yes, that is what I don't know how to work out 'the concept of repeating these formulae for multiple holdings,'

I would only like to make one sale per year, but as u pointed out, if one big swing in the market, the sale I've made say March 2021 to buy back April 2021, if Fund 2 moves a lot, that then has to be worked out for the future too.

My accountant didn't know but the boss boss did, & I will have to go back & push them.

NottinghamMan

Eco_Miser said:

One thing you must not do if you've got two funds A and B is switch from fund A to fund B, to rebase A, and then switch from the original holding of fund B to fund A to rebase B within 30 days of the first switch.

Yes thanks, I know that, not to buy back within 30 days. I'm trying to cover all options if Fund B swings too violently in that 30 days, & then I leave for the year & just swap back next year when I re-base again ie. I constantly have two funds forever. However I don't know the forumale for working out re-basing on 2 funds. 

eskbanker

NottinghamMan said:
u mentioned then that the working out on bases costs for two funds (Formula my word) is then not straightforward (for the likes of me).

I suspect that this dialogue has pretty much run its course but, for the record, I've never said that working out base costs for two funds is not straightforward - once you've established how to work out the base unit cost of holdings in a fund (or just read it from your platform if that can be relied on), it really isn't rocket science to repeat exactly the same calculation for another!

Perhaps you're confusing this with a different question you asked, where you were hoping there'd be a simple answer to 'how many units of each of two funds would I need to sell to reach my annual CGT allowance?', but even for that, it's not so much that it isn't straightforward as such but just that there are many valid answers rather than one....

NottinghamMan

eskbanker said:

NottinghamMan said:
u mentioned then that the working out on bases costs for two funds (Formula my word) is then not straightforward (for the likes of me).

I suspect that this dialogue has pretty much run its course but, for the record, I've never said that working out base costs for two funds is not straightforward - once you've established how to work out the base unit cost of holdings in a fund (or just read it from your platform if that can be relied on), it really isn't rocket science to repeat exactly the same calculation for another!

Perhaps you're confusing this with a different question you asked, where you were hoping there'd be a simple answer to 'how many units of each of two funds would I need to sell to reach my annual CGT allowance?', but even for that, it's not so much that it isn't straightforward as such but just that there are many valid answers rather than one....

No u didn't say it wasn't straightforward, I did. For me it's not straightforward. 
Vanguard do the average base cost for us, which means one less thing to do.
I can work out what I need to sell using the formulae u explained to me.
I can do for another fund too.
What I can't do is spread the £12,300 allowance over 2 separate funds, and as u said may have to be done by my accountant or an accountant. 
Yes, your last point explains what I mean't. ''how many units of each of two funds would I need to sell to reach my annual CGT allowance?'
So that is probably how I need to word it when asking someone if they can do this for me. 

U good at this, u probably an accountant or advisor or something, send me your details & I'll pay u once a year, sorted, I can get back to what I'm good at & forget this, although I've noted the formulae for one fund, as it's nice to always know that.