Vanguard tax advice

biffer_2

I've just started investing in Vanguard funds, but the whole tax side of share investments is completely new to me.  I know I have to do something before the end of this tax year to realise a gain otherwise I'll lose my CG allowance for the year.  So getting a tax statement from Vanguard sometime in the following tax year (assuming they can provide that) isn't all that useful. I'm in the same position as my wife with a split of ISA and non-ISA investments, no other income outside of PAYE.  The tax accountants I've spoken to just want to do my full tax return, which I'm already doing and isn't particularly difficult, and the charges for two tax returns with insurance seem to be considerable.

So my question is, what services are available to me?  Is there a company that specialises in this with knowledge of Vanguard?  Or are there books/periodicals I should be buying that go through all of this step-by-step and tell me what to do before year-end?

Thanks.

ColdIron

biffer_2 said:

I know I have to do something before the end of this tax year to realise a gain otherwise I'll lose my CG allowance for the year

Not necessarily and you will get a new allowance next year. You are only liable for CGT when you sell some or all of your fund and your gain (the difference between what you bought and sold it for) is greater than your £12,300 Annual Exempt Amount. Will the gain of a sale of £20,000 of your funds exceed £12,300? If not don't worry about it

I assume these funds are not in an ISA as they would be tax free. I also assume you are shifting £20,000 from your non ISA account into an ISA annually

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

jimjames

biffer_2 said:

So my question is, what services are available to me?  Is there a company that specialises in this with knowledge of Vanguard?  Or are there books/periodicals I should be buying that go through all of this step-by-step and tell me what to do before year-end?

Thanks.

There is nothing special about Vanguard, anyone dealing with CGT would be able to advise but unless you're making gains over £12,300 every year you don't need to worry about CGT until you come to sell some funds. Any money in an ISA is free from tax so the more you can shift into them the better as it avoids any of the need for records and calculations.

biffer_2

jimjames said:

unless you're making gains over £12,300 every year you don't need to worry about CGT

I don't really understand what you're saying.  If I make a gain, I surely need to realise it to use up my allowance.  Leaving a pot of money in a fund is going to mean a hefty bill after 10 years or so that won't fit within the allowance (assuming the allowance stays at current levels, which is by no means certain).

Albermarle

biffer_2 said:

jimjames said:

unless you're making gains over £12,300 every year you don't need to worry about CGT

I don't really understand what you're saying.  If I make a gain, I surely need to realise it to use up my allowance.  Leaving a pot of money in a fund is going to mean a hefty bill after 10 years or so that won't fit within the allowance (assuming the allowance stays at current levels, which is by no means certain).

Yes you need to realise it , but if the realised gain is less than £12,300 pa then there is nothing to pay .

ColdIron

biffer_2 said:

jimjames said:

unless you're making gains over £12,300 every year you don't need to worry about CGT

I don't really understand what you're saying.  If I make a gain, I surely need to realise it to use up my allowance.  Leaving a pot of money in a fund is going to mean a hefty bill after 10 years or so that won't fit within the allowance (assuming the allowance stays at current levels, which is by no means certain).

But surely you are transferring £20,000 into your ISA every year? If you sell (realise) £20,000 of your fund(s) you would be doing very well to make a gain of more than £12,300 even after several years. Those sales will use part of your allowance each and every year

For most people there is no reason to do more than this. Unless you funds are growing by an extraordinary amount or you have hundreds of thousands of pounds invested

biffer_2

ColdIron said:

Will the gain of a sale of £20,000 of your funds exceed £12,300? If not don't worry about it

I assume these funds are not in an ISA as they would be tax free. I also assume you are shifting £20,000 from your non ISA account into an ISA annually

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

Yeah, this is one approach that works fine if you just drip-feed from one account into the ISA and are happy to do that for a few years.  It's not so good if you think you may need the entire investment back at (fairly) short notice, for instance to move house.  Then you're not realising enough of the gain each year and your tax situation is disadvantageous in comparison to someone who re-invests. I've learnt to my cost in the past there are several CG scenarios you can sleep-walk into and this is one of them.

biffer_2

ColdIron said:

Are we talking hundreds of thousands of pounds?

It's complicated. There's a chance I may acquire some more money quite soon (1-2 years time), so the bed-and-ISA approach isn't going to be optimal.

ColdIron

biffer_2 said:

ColdIron said:

Will the gain of a sale of £20,000 of your funds exceed £12,300? If not don't worry about it

I assume these funds are not in an ISA as they would be tax free. I also assume you are shifting £20,000 from your non ISA account into an ISA annually

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

It's not so good if you think you may need the entire investment back at (fairly) short notice, for instance to move house

If you need the cash at short notice you probably should not be investing. What would you do if markets drop steeply?

assuming the allowance stays at current levels, which is by no means certain

Well the allowance for CGT has been frozen (along with other allowances) until April 2026 so you have that surety

It's complicated. There's a chance I may acquire some more money quite soon (1-2 years time), so the bed-and-ISA approach isn't going to be optimal.

Never the less Bed & ISA is still your best bet. The more money you tuck away in an ISA the less money there is to be exposed to CGT

But are we talking tens or hundreds of thousands of pounds here? Ignoring the wisdom of investing 100K or more for the short term, you could sell enough to realise just under a £12,300 gain and do this each year. But there are other issues such as buying back within 30 days (bed and breakfasting rules) and keeping detailed records of all those sales and purchases (which you should be doing anyway in case you are challenged by HMRC)

But I can't help thinking you are over thinking this. The vast majority of people don't need to go down this route. Recently I completed a six year project to Bed & ISA my growth funds and even in the final year I had excess Annual Exempt Amount headroom

biffer_2

The thing is, when people say 'just get an accountant' it's not much use for me.  Because figuring out who that is is a project of similar complexity to actually figuring out what I have to do myself (going through websites, checking reviews, having introductory meetings).  So this seemingly simple suggestion hides a wealth of complexity and guess-work (although I appreciate people are only trying to give the best advice they can).  So I always end up going the DIY route in preference.  But if there was some go-to company or organisation for specifically my kind of problem that may change things.  But it seems there isn't according to the responses so far.

That's really the crux of my question rather than the steps I have to take in my particular situation.  The whole point in the Life Strategy funds for Vanguard (or so I thought) is that I just forget about my investments for the most part which would be largely true for ISAs but outside the tax-free wrapper that's not really the case.  The law has to be reviewed each year to avoid getting caught out and failing to declare something you should have done, there's the income component of some funds, the CG situation, my allowances, my wife's allowances and so on.

biffer_2

The other thing I wondered is if I should not be using Vanguard at all.  If there's another investment platform that gives proper tax advice as an add-in then it may be worth me switching.