Trying to wrap my head around old paper share certificates (what to keep) for an elderly relative.

sanfairyanne

Please can someone offer some advice. I have an elderly relative who inherited lots of different holdings about 25 years ago. Some holdings have dividends paid in cheque while some are dividend reinvestments. This relative has literally putting everything into a box for years. It's all there, just jumbled up in a box the size of an ancient television!
When I look at the paperwork for BT I see the dividend reinvestment letter states that it must be kept. Is it possible that if you lost this you would lose the dividend? My assumption is that if you had say 100 shares in 1980 and got 10 shares a year as a dividend reinvestment then by 2021 you would expect to have 41 years multiplied by 10 shares i.e. a total of 141 shares. I realise of course there could be a stock split etc. But my assumption is that BT would still keep a record of the amount of shares owned by any one shareholder. Otherwise if your house burned down you'd lose all the dividends. I'm hoping I can just pull out the latest share certificate from each holding and throw away everything else. If not it's going to be a monumental task to sort through - and lots of certificates will likely be lost. Many thanks for any advice.

underground99

You won't lose the dividend - it has been reinvested to buy more shares. They tell you to keep the letters because you may need them for tax records - it's hard to know if you owe any income tax for the year on dividends received, or whether you owe capital gains tax on an eventual sale of the shares, if you don't keep the record of how much you received as dividends and reinvested into the company.   

For example when you come to sell some of your big pile of BT shares in 2021, you might have acquired some of them when your dividends were reinvested in 1995,1996 etc etc, and without records, you would only know how much you paid for the initial ones in 1980 and not how much was invested to buy the various ones along the way. 

If you know how much you paid to buy each of the lots of shares along the way, because you kept the letters, then you can say I am selling 141 shares now and they cost me a total of £x to buy  (the £x being a sum of the £a first invested and the £b, £c, £d etc etc which were reinvested when you received the £b, £c, £d of dividends and chose not to take them as cash). That way, if you know the final pile of shares cost £x in total you can see that the difference between the cost of £x and sales price of £y is your profit of £z.  

sanfairyanne

Thanks Underground99. I believe I understand, they are needed for capital gains tax. Ok so as an example, if the value of the BT shares is less than £12,300 (current CGT allowance) they could be sold this year without paying any capital gains. 

As the total value of all these shares is not huge and there's little urgency to sell they could be sold bit by bit each year without worrying about CGT. I assume you don't detail capital gains on your tax return if they are below £12,300? I mean who tells HMRC they bought a car for £1000 and sold if for £2000 I assume HMRC doesn't care unless it's over the allowance.

MX5huggy

How much divided (from all shares) are they receiving? £2000 is the limit (unless they have unused income tax allowance) before tax is due.

I would just keep everything, sorted into files or piles for each company. Then work out the total value and decide what if anything needs doing. 

Eco_Miser

sanfairyanne said:

 I mean who tells HMRC they bought a car for £1000 and sold if for £2000

Nobody, because cars aren't subject to CGT. They're much more likely to result in a loss than a profit, and HMRC don't want to be offsetting gains on shares or houses with losses on cars.

Thrugelmir

Executors of estates are well versed in looking through boxes of paper. Keep everything for the time being. Will help in the longer term.  

sanfairyanne

Thanks for the feedback MX5huggy I forgot £2000 was the limit for dividends. 

We've come to a compromise, we'll keep everything, but we're going to put one of each of the most up to date share certificates into a separate folder.

I'm buried under piles of paperwork, so my reply is brief, but thanks I'm getting somewhere slowly. 

sanfairyanne

MXHuggy, The income tax allowance is £12570. I assume you need to take off the state pension from this?

So if my mother receives £9000 she can earn £3570 in cash dividends before she is liable for tax?

MX5huggy

If she has no other income then yes plus the £2000 dividend threshold so £5570 before paying dividend tax which is 7.5% https://www.gov.uk/tax-on-dividends

Don’t forget she has £1000 savings interest limit as well. If she’s really getting anywhere near these limits then she should be using ISA’s to avoid tax and keep things simple.

eskbanker

MX5huggy said:

If she has no other income then yes plus the £2000 dividend threshold so £5570 before paying dividend tax which is 7.5% https://www.gov.uk/tax-on-dividends

Don’t forget she has £1000 savings interest limit as well. If she’s really getting anywhere near these limits then she should be using ISA’s to avoid tax and keep things simple.

She'd also have the £5K starting rate for savings too, so could potentially receive £20,570 of income without paying tax (if it's the right split): https://www.gov.uk/apply-tax-free-interest-on-savings

LHW99

At one time, the letters that notified of a scrip dividend also had a share certificate for the odd 1 or two shares that represented the dividend. If so, may be worth getting all the bits of paper that represent share certificates put together in a large labelled envelope.

My late mother used to stick hers in a bright green carrier bag for sorting, although they all went in with the many pieces of postal spam she used to get ("free" draws etc)