What to do once maxxed out annual pension and ISA limits....

ColdIron

Ignoring trade costs and stamp duty etc your gain (or profit) is £24,600. It doesn't matter whether that gain was made in Y1, Y2 or Y9. £12,300 will be taxed at 0% (the Annual Exempt Amount) and the balance taxable at your relevant rate

Thrugelmir

solidpro said:

Let's say (total theory, of course) you have a GIA with £100,000 invested and it makes exactly 12.3% increase in value - £12,300 in Y1 in profit and then a little less % increase/profit again in Y2 but the net result of the total profit in Y2 is another £12,300. Is the net result in cashing in that investment £0 tax or CG on the £24,600 total profit?

In other words, is the CG calculated and reset annually or only paid when you 'cash in' the investment - perhaps after 10 years?

In year 2 , CGT would be chargeable on £12,300. The annual allowance of £12,300 being deducted first. 

In simple terms crystallising profits every year to utilise the annual allowance would be the best strategy. Also realising losses as these too can be offset against taxable gains. 

billy2shots

solidpro said:

Let's say (total theory, of course) you have a GIA with £100,000 invested and it makes exactly 12.3% increase in value - £12,300 in Y1 in profit and then a little less % increase/profit again in Y2 but the net result of the total profit in Y2 is another £12,300. Is the net result in cashing in that investment £0 tax or CG on the £24,600 total profit?

In other words, is the CG calculated and reset annually or only paid when you 'cash in' the investment - perhaps after 10 years?

No, you can't carry over unused CGT allowance. It's a use it or lose it tax.

In your example taking £24,600 in year two would result in £12,300 tax free  (I'm not pedantic) but the other £12,300 would be taxed (CGT) depending on your individual circumstances. 

MX5huggy

Venture Capital Trusts are the next thing to investigate. I’m not in the fortunate position of needing to. https://www.thisismoney.co.uk/money/diyinvesting/article-10008789/amp/VCTs-invest.html

solidpro

So, if it was £12,300 profit in a VLS100, you'd have to cash it all in a week before the end of the FY, sell all the shares, hold it as cash and then reinvest it on day 1 of the next FY and then you'd avoid CGT? Do people do this?

eskbanker

solidpro said:

So, if it was £12,300 profit in a VLS100, you'd have to cash it all in a week before the end of the FY, sell all the shares, hold it as cash and then reinvest it on day 1 of the next FY and then you'd avoid CGT? Do people do this?

If you reinvest in the same assets within 30 days of the sale, it doesn't crystallise the gain for CGT purposes so is effectively a waste of time if that's what you were trying to achieve....

billy2shots

solidpro said:

So, if it was £12,300 profit in a VLS100, you'd have to cash it all in a week before the end of the FY, sell all the shares, hold it as cash and then reinvest it on day 1 of the next FY and then you'd avoid CGT? Do people do this?

Either wait the 30 days or reinvest in a similar fund. 

jimjames

solidpro said:

So, if it was £12,300 profit in a VLS100, you'd have to cash it all in a week before the end of the FY, sell all the shares, hold it as cash and then reinvest it on day 1 of the next FY and then you'd avoid CGT? Do people do this?

Others have clarified but the answer is yes people do sell assets to crystallise a gain

fizio

Great thread as I am also in this position - but would like to use as much cgt allowance each year as poss for income. What I’m struggling with is the best type of investment to go for - i read that ETF’s are not great in terms of doing the calc to work out dividend versus capital gains for the tax return and a fund or IT is better. I am already using the dividend allowance so would want to invest in growth stock more than dividend stock - not entirely sure how that will work with a global tracker approach..  A bit confusing but am trying to work through it

PaulPension

Just to add to MX5huggy’s post on VCTs (Venture Capital Trusts), these can be a very tax efficient investment if you’ve used your £20K/annum ISA allowance and £40K/annum pension tax free contribution.

Investments in VCTs qualify for up to 30% tax relief if you hold the VCT for a minimum of 5 years. Any less and the tax relief is clawed back.

However, you do need to be aware that VCTs are required to invest in small enterprise sort of companies that are higher risk of you loosing money. An advantage is that any dividends are tax free, as is any capital gain when you sell the VCT. You basically get all these tax advantages in return for investing in smaller enterprise companies.

There are also EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme) which offer similar tax advantages, again with more risk and some slightly different rules.