CGT on shares and offsetting losses

n15h

Hi, I am looking for some guidance and hopefully someone can help with this query on capital gains tax on some shares that i've sold, and whether it can be off-set by some losses made on some other shares. I have been fortunate to have a savings nest thanks to some inheritances I got some years ago and invested some of the money in shares in the AIM market and try my luck at investing. I work full time with an annual income of £32K per year and am a basic rate tax payer.

• Bought shares in Company A in 2018 and sold them this year. It was a sizeable investment that paid off and the profit on sale of these shares is £40K.
• Bought shares in Company B in 2018 worth £1500 in 2018. The company no longer exists since 2020 and the shares have no value.
• Bought shares in Company C worth £2000 in 2019. The company ceased trading in 2020 and these shares have no value.

I had already maxed out my S&S ISA allowance at the time so I bought the shares in Company A, B and C using a share dealing account which charges £10 per trade. I have not sold these shares in Company B or C so they are still in my portfolio, but they are each a 100% loss and I will never see that £3500 again. The shares for either company cannot be traded on any share market as well.

I tried to work out how much CGT would be on the £40K profit and found a CGT calculator on Tax Scouts website https://taxscouts.com/calculator/capital-gains-tax/

This calculator shows that the CGT is £3740 based on the gain of £40K and annual income of £32K. A friend told me that if I made a loss on any shares, this loss can be offset against the tax and lower the amount of tax. So based on that, I am presuming that on the £3740, the losses of £1500 and £2000 would mean CGT of £240 i.e.: 3740 - (1500+2000). 

I wanted to ask if any of this correct, including the CGT amount of £3740, whether the trade costs and shares losses can be offset against the CGT, and and how all of this needs to be recorded on a tax return. Any help or advice on this is much appreciated. Apologies if this is in the wrong forum! 

I also saw on the Tax Scouts website that they can sort the self assessment out for a fee of £119, so am thinking of paying the fee and letting them work it all out. However, if it's simple to complete my own self assessment including calculate the CGT and offset the losses / tax, then I'm all for saving that £119.

Either way, I'm sure I'll learn something new from this post/forumites

Thanks in advance

Dazed_and_C0nfused

A friend told me that if I made a loss on any shares, this loss can be offset against the tax and lower the amount of tax. So based on that, I am presuming that on the £3740, the losses of £1500 and £2000 would mean CGT of £240 i.e.: 3740 - (1500+2000). 

I think you have misunderstood your friend.

If there is an allowable loss then it would be offset against the other gain.  Not the tax liability.

https://www.gov.uk/capital-gains-tax/losses

n15h

Dazed_and_C0nfused said:

A friend told me that if I made a loss on any shares, this loss can be offset against the tax and lower the amount of tax. So based on that, I am presuming that on the £3740, the losses of £1500 and £2000 would mean CGT of £240 i.e.: 3740 - (1500+2000). 

I think you have misunderstood your friend.

If there is an allowable loss then it would be offset against the other gain.  Not the tax liability.

https://www.gov.uk/capital-gains-tax/losses

Thanks, just to make sure I understood the guidance on the Gov.uk site, the loss of £3500 could be offset against the £40K, and therefore reduce the amount on which CGT would be charged - is that right?

On that website, it also mentions Negligible Value Claim - which seems more applicable to my situation as the shares of £2000 and £1500 are completely worthless i.e negligible.  

Jeremy535897

You make a negligible value claim on the shares in B and C of what you paid for the shares, including acquisition costs, and set that loss against the gain on shares in A.

n15h

Cheers, I get it now that the losses are not against CGT but instead would be offset against the gain made i.e. the profits from Company A shares, so that tax is charged on a smaller gain rather than a larger gain.

I've never done a self assessment before. Is there any guidance available on how to complete a self assessment for shares, or am I better off going to an accountant?

Dazed_and_C0nfused

You can have a red through the paper 2019:20 CGT pages and accompanying notes on gov.uk.

https://www.gov.uk/government/publications/self-assessment-capital-gains-summary-sa108