Understanding Capital Gains Tax

agent69

My stocks and shares have gone up a bit this year and I am trying to understand how CGT works.

If I have £50k invested and it goes up by 10% I finish year 1 with £55k. If I leave it invested and it goes up by another 10% in year 2 my total gain would be £10.5k, which would attract CGT when I sell. However, can I avoid CGT by cashing in the £55k at the end of year one and immediately buying the same stocks and shares back.

Essentially, should you try to crystalise gains each year up to the CGT limit, rather than leaving the gains to mount up.

masonic

Suggest you have a read of https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg13350

Beddie

Your plan is good, but as per the link above you must now wait 30 days to buy an asset back or it doesn't count as a gain. Allowance drops to £3k from 6th April.

So, either wait 30 days between selling and buying, or buy something else instead.

Or, even better - use an ISA!

agent69

Beddie said:

Your plan is good, but as per the link above you must now wait 30 days to buy an asset back or it doesn't count as a gain. Allowance drops to £3k from 6th April.

So, either wait 30 days between selling and buying, or buy something else instead.

Or, even better - use an ISA!

I have an ISA and non ISA account, and I was looking to sell £20k from the non ISA account and then buy them back in the ISA account in the next tax year. So if I want to buy back the exact same shares I need to wait 30 days, but I assume if I sell one of the global tracker funds I can buy something similar straight away?

MX5huggy

If you’re going from general investment account to ISA there’s no need to wait 30 days you can buy the same thing within the ISA straightaway. The sale will generate the CGT liability using up CGT allowance.

The 30 day rule only covers buying exactly the same asset so yes sell one global tracker buy another .

LHW99

The 30 day rule only covers buying exactly the same asset in the same account* so yes sell one global tracker buy another .

*My addition
ie if you want to re-buy in the unwrapped account you sold in you can either buy a different company's version of a similar fund (eg Fidelity Index World vs HSBC All World), or you can buy a different unit type (acc versus inc) 

Alternatively you can buy exactly the same thing in the wrapped (ISA) account after selling in the GIA, as you suggest.

All these options can be done immediately the original is sold (subject to any waiting for the sale proceeds to arrive that your provider imposes).

ColdIron

agent69 said:

However, can I avoid CGT by cashing in the £55k at the end of year one and immediately buying the same stocks and shares back.

As others have said buying the same investment immediately would not be a disposal

However it's worth noting that even if you chose a similar, but not identical, investment vehicle, your gain in the second year would be £5,500 which would exceed the lower 2024/25 Annual Exempt Amount of £3,000

You should tuck as much into an ISA as possible and be done with it forever