Asset allocation on unwrapped investments to minimise CGT

aroominyork

EthicsGradient said:

aroominyork said:

We may be at cross-purposes, EG. I am asking which assets to hold wrapped (SIPP/ISA) and which to hold unwrapped. Minimising annual tax is straightforward: OH has a capital gain a fraction over £6k this year so we'll avoind trading; I have not traded but am carrying a c.£3k capital loss from last year so I'll aim to trade a gain between £6k-£9k (I can swap the wrappers between the unwrapped index fund and a currently wrapped active equity fund).

I agree those assumptions are at the high end but I used them to magnify the tax impact.

Do you mean your OH has already realised a capital gain a fraction over £6k this year, so they'll pay a very small amount of CGT, and avoid further trading; or that their entire unwrapped portfolio has a potential capital gain at the moment of just over £6k?

It's this.

Aminatidi

Out of curiosity why do you seem to have set a ceiling on the amount of short term low coupon gilts you want to hold?

To me they almost look a "too good to be true" bottomless pit where unless you're almost literally a millionaire the tax element is almost non-existent isn't it?

aroominyork

Sure they are good, and tax aside I prefer them over a global aggregate bond fund like VAGS, but I still wouldn't put all my eggs in that basket. The Man GLG corporate bond fund should provide higher returns - obviously with some risk - and about half my bonds (I run 70% equities / 30% bonds) are in WP funds. But as a low tax cash proxy nominal gilts are indeed excellent.

ChilliBob

I'm considering this too, and to be honest I've basically opted for Gilts and a global index pretty much. I think your 10% capital growth from a Global Index, if I've read that correctly, is a bit ambitious based on forecasts from Vanguard et al - although with VRWL returning 7.64 ytd perhaps they're wrong!

Side note, the yields on Gilts have just taken a drop - TN28 was 4.8 earlier this week, tis 4.51 now, boo! 

I'm tossing up whether it's worth a hit in 3 years time for a green bond at 5.7% in addition to this too - as I suspect interest rates won't be where they are now in 3 years.

Aminatidi

This is where I think I'm headed too.

Already got the global index just debating the maturity I'm prepared to lock in for as I love the certainty of gilts but instinctively dislike "fixing" deposits (I know you can sell a gilt whenever but you take the point ).