A simple guide for CGT liability on GIA please?

RogerPensionGuy

Hi all.

I'm a slow learner, so please be kind as it appears CGT is simple to understand. 

I've searched around looking for a dummies guide, but can't find one.

A few examples in my head and say 3K is the limit now.

I put 100K in a GIA and buy 4 different units 25K each.

In 4 years time GIA is say 140K

Units value is 50, 50, 20 & 20K.

If I cash up the entire GIA I get 140K and that will be a 40K gain, minus 3K allowance, so 37K gain and I need to pay 10% or 20% CGT depending on my my marginal rate on the 37K.

Can I use 4 years of 3k allowance, so that would be 40K minus 12K equals 28K capital gain, so 10% or 20% to pay on 28K.

Or do I work out 50K gain and minus 10K loss to get that 40K figure. 

I'm about to use GIAs whereby I'll hopefully need to fully understand how CGT will affect them.

The CGT has gone fron 12K PA to just 3K from next month, that's a massive 75% reduction just as I was planning to use them.

Hopefully someone can post a simple simple link or YouTube explanation of how this works. 

If no carry forwards, guess I'll have to sell units every year to get 3K profit and buy units straight away. 

I'm confused.com, any help most welcome please. 

[Deleted User]

I have no idea what a GIA is but what I can tell you that from next year the annual exemption is 3000. That’s the maximum for the whole tax year. There is no separate 3000 per disposal. 

Your gain is 40000 unless you make part disposals as you have indicated. 

Hoenir

RogerPensionGuy said:

Or do I work out 50K gain and minus 10K loss to get that 40K figure. 



The CGT has gone fron 12K PA to just 3K from next month, that's a massive 75% reduction just as I was planning to use them.



If no carry forwards, guess I'll have to sell units every year to get 3K profit 

Correct. 

No, the 2023/24 tax year is a £6k allowance.

To incur no CGT then yes. 


NB. Remember losses can be claimed and carried forward to be offset against future years profits. 

[Deleted User]

Hoenir said:

RogerPensionGuy said:

Or do I work out 50K gain and minus 10K loss to get that 40K figure. 



The CGT has gone fron 12K PA to just 3K from next month, that's a massive 75% reduction just as I was planning to use them.



If no carry forwards, guess I'll have to sell units every year to get 3K profit 

Correct. 

No, the 2023/24 tax year is a £6k allowance.

To incur no CGT then yes. 


NB. Remember losses can be claimed and carried forward to be offset against future years profits. 

I think that the op was looking to carry forward any unused exemption which, of course, can’t be done!

Hoenir

[Deleted User] said:

Hoenir said:

RogerPensionGuy said:

Or do I work out 50K gain and minus 10K loss to get that 40K figure. 



The CGT has gone fron 12K PA to just 3K from next month, that's a massive 75% reduction just as I was planning to use them.



If no carry forwards, guess I'll have to sell units every year to get 3K profit 

Correct. 

No, the 2023/24 tax year is a £6k allowance.

To incur no CGT then yes. 


NB. Remember losses can be claimed and carried forward to be offset against future years profits. 

I think that the op was looking to carry forward any unused exemption which, of course, can’t be done!

Seemed easier to clarify the thinking first. 

eskbanker

[Deleted User] said:

I have no idea what a GIA is...

General Investment Account, i.e. one outside of tax wrappers such as ISA or SIPP.

EdSwippet

RogerPensionGuy said:

If no carry forwards, guess I'll have to sell units every year to get 3K profit and buy units straight away. 

Except, if buying back "straight away", you'll need to buy something different to what you sold. Either that, or wait 30 days to buy back the same thing you sold.

RogerPensionGuy

https://www.ajbell.co.uk/learn/capital-gains-tax#:~:text=1) Use or lose the annual CGT allowance&text=If you do this within,'bed and breakfast' rule.
☆☆☆ This fro post above, tks.☆☆☆

So not very friendly at just 3K PA. 

Is the following example correct?

Plonk say 100K in a GIA all in the same unit. ABC123.

Don't touch it for 10 years and sell it Al at say 150K, 

That's a 50K CGT minus 3K allowance and then need to pay tax of 10% or 20% on that 47K, is this correct?

Or as per example above, but every year sell units to get a 3K CGT and buy a different unit or wait 30 days and buy saje unit. Then at 10 years, sell the lot at 150K, then just a 20K CGT to pay 10% or 20%Tax.

If as I suspect both the above are correct, what a funny system and think the selling and buying charges are paid personally, so clunky, hassle, expensive and a waste of effort. 

Why not just let the 3K CGT carry forwards. 

I has been planning to park cash in a GIA as it used to be 12K CGT PA which appeared simple to manage, shuffling 3K of units every year is hassle and not doing it is expensive if indeed the GIA goes up.

☆☆☆

https://www.taxcafe.co.uk/resources/capital_gains_tax_allowances.html#:~:text=2021/22 £12,300,2024/25 £3,000

☆☆☆

CGT sitting at 12Kish for 8 years, then chopped to 6K and down to 3K in the last 18 months. 

I was thinking they treated the pension LTA strangly the last 15 years, then happy they essentially cancelled it, but this CGT sitting at 12K for years, then big real inflation, but they reduced it to just 25% of what it was, crazy. 

Anyone comment on why they treated CGT like this, I'm guessing they just see it as low hanging fruit and they certainly need any fruit available the next few decades.

RogerPensionGuy

I think I'm suffering from tail wagging the dog in my head.

I guess all the hassle and risk still makes it personally advantageous if I only pay 20% CGT in lieu of paying 40% on savings interest. 

I've half looked at EIS, VCT and the like, they all seam like hassle to a person who likes a simple life, obviously for people with big wealth, employ a wizzard and the economies of scale work to squeeze as much value out of wealth. 

Thanks to all posters on this thread, think I now understand CGT at 3K PA in lieu of 12K has been bad timing for me because I'm lazy and don't like clunky stuff.

I'm all ears if anyone says there's an easy way to protect cash or wealth against inflation plz?

Cheers Roger. 

eskbanker

RogerPensionGuy said:

I'm all ears if anyone says there's an easy way to protect cash or wealth against inflation plz?

Investing will generally be the most likely route to protection against inflation, rather than saving in cash deposit form, but in terms of vehicles to protect against tax specifically, your username ought to be a clue to one option to maximise, assuming you're already making most use of ISAs!

RogerPensionGuy

I have a few more questions. 

1. If buying and selling units in a GIA, how do HMRC know this data unless an individual person advises them?

2. If buying keeping and selling MMF units in a GIA, how do HMRC know those data unless individual person advises them?

3. Reference MMF units, is the interest and CGT on the units both subject to Tax?