Advice on / tax implications about leaving Degiro for UK based broker

Drtkd

Would love to get someone to 'check my working' and advice if I am thinking clearly about my situation.

I am PAYE employee, and have never done a self-assessment before. 80% of all investments are in Vanguard's UK S&S ISA wrapper, and the remaining 20% have until now been in Degiro - used to trade US based stocks. I know Degiro has its limitations (not covered by FSCS), but I have found it really good to use.

I am looking to move that investment account to a UK broker, mostly out of a fear of having a 'foreign account', as my capital gains and total investment amount creeps up (unrealised gains of ~5k on total of ~16k).

No UK based broker seems to accept a transfer from Degiro.

The 'easiest' way I can think of 'transferring' over now is to sell all my shares, withdraw the money out, and then create a new account with a UK broker and deposit that money in. But something about that doesn't feel right...

My understanding of the CGT rules are I should be okay, because the limits are £2,000 for dividends and £13,000 for gains, which I am easily under. As far as I am aware, I will not need to pay any tax or inform HMRC of anything if I were to do the sell all + then buy all back approach.

In terms of brokers, I am debating between Lloyds share dealing (£40 annual charge and no US stocks trading fees...) and Trading212. I am put off a bit by Trading212 and it's "free" model. I cannot have a S&S ISA account because I already have one with Vanguard UK (which holds 80% of my portfolio).

Does it make sense? Plan is: sell all, withdraw money, then buy all. Way I read it I have no tax due / implications. 

masonic

If you buy back the same investments within 30 days of selling them, then it would not count as a disposal for CGT purposes due to bed and breakfast rules. However, you would have time out of the market, which could result in you making losses. You would not need to declare anything to HMRC if you do not make any actual disposals during this tax year. You would need to remember that going forward, it would be the original acquisition price (at DeGiro) that would be used for future CGT calculations, not the price you pay to buy your assets back at your new broker within 30 days. I believe the sale and purchase price of the 'matched' trades in the self-transfer can be factored into the CGT calculations.

You can have more than one S&S ISA, but you can only pay into one of these per tax year.

Drtkd

Thanks masonic, that's fantastic. I was not aware of the bed and breakfast rules. Looks like another reason this won't be a taxable event, but I need make sure I have all my documentation files in order.

Do you, or other forum members, have any views on using Trading212 vs a 'traditional' UK broker?

masonic

Trading212 is small, relatively new, and its sharedealing activities are loss-making (it makes its money from CFD trading). Its UK subsidiary is FSCS protected, so the only risk is one of having to go through a drawn out administration process without access to your investments, should it fail. If you can live with that, and limit the amount you invest there, it is a reasonable option. I would always go for a significant and established player for large sums invested.

masonic

One other thing to note is that others have reported that DeGiro automatically invests cash balances in money market funds. This can have the effect of adding to the total volume of disposals made from DeGiro's perspective. It will report this figure to HMRC, and HMRC may contact you if this total exceeds 4 x the CGT allowance, since this is a trigger for reporting gains if you are on self-assessment. HMRC may therefore require you to make a declaration that your gains were under the CGT limit (I'm assuming you don't complete a tax return).

Drtkd

Interesting, also was not aware of that from Degrio! I have seen threads of weird HMRC tax calls from Degiro, but didn't know what the cause was. 

You've made me check my annual reports with Degiro, and I find it interesting that the disposals' section is titled 'Disposals (excluding Money Market Fund transactions)'. I can't find a total that includes the money market fund transactions...

I will end up trying to export every single transaction as a .csv file in that case. I always worry after I close an account I might end up losing that information without a chance of getting it back.

My cash balance is always been negligible, and volume has been low (no day trading madness, one a month transactions so even with 'tripling' up - first cash to MMF 'purchase', then sale of MMF, then purchase of chosen share) I don't see it triggering that 4 x CGT limit.

Out of interest - do you know what happens if you do think you have triggered that limit (£50k) but don't do self-assessment? I have never done one because never had reason to do one thanks to PAYE and everything being under ISA.

The wording on the gov website seems to suggest if you only need to report if both apply (both amount sold was 4 x allowance + registered for self assessment). So if you are not registered, it implies this allowance doesn't matter. 

I must say this situations like these where it really makes me doubt and question if all the hassle with investing in individual shares outside of Vanguard is worth it at all!

wmb194

Apart from this strange money market thing with De Giro that a poster in another thread says has confused HMRC, in principle having a foreign domiciled stockbroker or bank account is a non-issue. Given we're taxed on worldwide income, you just report your gains, losses and income as usual. Often the only hassle is making sure you use the correct exchange rates.

masonic

Drtkd said:

Out of interest - do you know what happens if you do think you have triggered that limit (£50k) but don't do self-assessment? I have never done one because never had reason to do one thanks to PAYE and everything being under ISA.

Nothing if your gains are insufficient for there to be any tax payable. You only need to make a declaration to HMRC if there is tax owed. Those submitting a tax return anyway would need to complete the CGT section whether or not they owe anything, so it's an inconvenience for them. When a broker reports an investor has breached the 4 x CGT allowance in disposals, it seems to be a trigger for HMRC to get confirmation that no tax is due, given a few posters have reported receiving 'nudge' letters to that effect. This may be particular to offshore brokers, as it's not something anyone has mentioned in relation to UK brokers/platforms.

DeGiro's capital gains and disposals figures are always going to be an estimate, because they cannot see any trading you do elsewhere, and "disposals" that can be matched to purchases elsewhere under bed and breakfast would be disregarded.