Capital Gains on a long term shares investment

Freddythefearlessfish

Can someone just explain this to me really simply - as to an idiot.

First off what I understand.

If I buy shares this year for £10,000 and they double in value this year and I sell them in the same tax year.  Then there is a capital gain of £10000.  This money needs to be declared to HMRC.  The amount is still below the threshold of £12500 - so I won't have to pay any tax on it.  But I still need to declare it.

What I'm wondering is what happens if I buy shares this year for £10,000 and they double the is year to £20000, but I decide not to sell them (so because they aren't sold I'm not supposed to declare them), then the following in year they don't do as well but they do still go up by £5000.  So they are now worth £25000.  I've made £15000 in gains over two years. 

Secondly my question:  If I decide to sell them next year.  Will I need to declare a capital gain of £15000 in that year?

I guess my logic is trying to work out whether there there can be a benefit from selling and rebuying the same stock at the same point in time (when the profit gets close to the threshold).  Realistically for me my shares don't grow that rapidly or nicely.  On the other hand there is a potential that you can simply spread the gains over the two years - it is just from what I can tell it doesn't work like that in the UK (even if it does in the US).

Thrugelmir

Have a read.

https://www.investmentguide.co.uk/capital-gains-tax-30-day-rule/

dunstonh

This money needs to be declared to HMRC.  

No it doesn't.  It's below the threshold for reporting when the gain is within the allowance.

Secondly my question:  If I decide to sell them next year.  Will I need to declare a capital gain of £15000 in that year?

yes as they have exceeded the allowance.

I guess my logic is trying to work out whether there there can be a benefit from selling and rebuying the same stock at the same point in time (when the profit gets close to the threshold).

that wouldn't work.  HMRC are not silly and have rules on that.

 On the other hand there is a potential that you can simply spread the gains over the two years - it is just from what I can tell it doesn't work like that in the UK (even if it does in the US).

Gains outside of any tax wrapper are measured on disposal.  Not in real time.  

Most people would bed & ISA and bed & pension where possible to use some CGT allowance and try and use more through rebalancing their portfolio.    And if necessary, sell and buy different shares/funds to force a gain within the annual allowance.  e.g. if you hold HSBC American index then you cant sell and buy back immediately.  So, buy back Vanguard US equity instead.  

ColdIron

Freddythefearlessfish said:

If I buy shares this year for £10,000 and they double in value this year and I sell them in the same tax year.  Then there is a capital gain of £10000.  This money needs to be declared to HMRC.  The amount is still below the threshold of £12500 - so I won't have to pay any tax on it.  But I still need to declare it.

There is no tax to pay as you say but neither do you need to report it

If your total gains are less than the tax-free allowance

You do not have to pay tax if your total taxable gains are under your Capital Gains Tax allowance.

You still need to report your gains in your tax return if ***both*** of the following apply:

• the total amount you sold the assets for was more than 4 times your allowance
• you’re registered for Self Assessment

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

Secondly my question:  If I decide to sell them next year.  Will I need to declare a capital gain of £15000 in that year?

Yes (if that was the only sale), because your gain was greater than the £12,300 Annual Exempt Amount

It's important to realise that it makes no difference whether you sold them this year, next year or in 10 years time. It's the disposal that counts, how long you have held them is irrelevant

I guess my logic is trying to work out whether there there can be a benefit from selling and rebuying the same stock at the same point in time (when the profit gets close to the threshold). 

There can be but most people would hold their investments in an ISA or a SIPP. However if your investments are outside a tax privileged account and you do sell and re-buy there are rules on when you re-buy. See Thrugelmir's link regarding the 30 day rule

Freddythefearlessfish

Thanks very much everyone.  All very helpful.  I do appreciate it.  Though as far as I can tell you can't buy crypto currency in an ISA or SIPP.

grumiofoundation

Freddythefearlessfish said:

Thanks very much everyone.  All very helpful.  I do appreciate it.  Though as far as I can tell you can't buy crypto currency in an ISA or SIPP.

In your OP you were talking about shares.