A simple guide for CGT liability on GIA please?

RogerPensionGuy

EdSwippet said:

RogerPensionGuy said:

Am I correct that HMRC do not receive such data from GIA platforms?

As of 2021, the (now disbanded, because it was too sensible to keep it around) OTS stated that "Data from other sources, such as investment income and dividends are not currently reported to HMRC by third parties. Instead, the third parties concerned provide individuals with the information and the individuals or their agents report to HMRC when appropriate."

I couldn't find anything newer than this, so likely still the case, then. In which case yes, HMRC don't see this directly, and it is (as ever) up to you to handle it somehow. When the dividend allowance was still a sensible amount, most taxpayers probably didn't have any reporting requirement. After multiple allowance cuts by the government though, quite a few will now have to tangle with it.

RogerPensionGuy said:

Also a schoolboy question, if I buy a load of units in a GIA and say sell them in the future, say the unit buy and sell was 10K different in value, but the cost of operating the GIA is say 1k over that period. Is my GCT 9 or 10K? 

Cost of operating? You cannot realistically deduct a platform's flat annual fee, but you can deduct purchase and sale costs. Simply, if you buy £1,000 of a fund costing £1/unit and pay £5 to trade, you end up with 995 units with a pool cost of £1,000. Say the price doubles, and you then sell all 995 units with again a £5 sale fee; you get back £1,985. Your capital gain is the £1,985 you received less the £1,000 you paid, so £985. You have effectively deducted your trading fees from your gain.

For a worked example from HMRC, see Help Sheet 284.

It's not exactly complicated, at least if you can see the logic (such that it is), but it is fiddly and annoying. After a while, you either come up with a good spreadsheet of your own or you throw up your hands in horror and pass it all off to an accountant.

Very helpful feedback here, I thanks so much. 

I was thinking a GIA was pretty simple ar a 12K CGT limit, but 3K as it is currently is a hassle hopefully. 

Then I like playing with my units, loke selling some at a loss and some at a profit, this will make it not to my liking unfortunately.

Guessing if I'm going to do GIA longterm, will just need to buy a low cost worldwide index tracker unit, then if I ever sell numbers of units, I I can work out the gain.

I have read about carrying forward looses, more complicated. 

Reference just buying one unit and topping up GIA monthly, that's buying them at 12 different prices every year, maybe over 5 years is 60 different buy prices, maybe the monthly input will vary each month. 

It looks like a drama for a person who' just wants something simple. 

Similar to CGT going from 12K to 3K, the current interest rates will mean a big Big rise in people trying to fill out all these self assessment stuff.

I used to like the old fashioned way of just paying 20% tax on savings interest, it made life so simple.

I do wonder if the ISA rules will be attacked soon.

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I googled the reference from the post above, if I picked up the right stuff, looks like HMRC have been advised CGT stuff could be much better, with it now 3K PA from 12K looks like lots of paperwork and phone calls ongoing. 
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https://www.gov.uk/government/publications/ots-capital-gains-tax-review-simplifying-practical-technical-and-administrative-issues#:~:text=The OTS recommends that the government consider whether Capital Gains,preserving eligibility to existing reliefs.

EdSwippet

RogerPensionGuy said:

Reference just buying one unit and topping up GIA monthly, that's buying them at 12 different prices every year, maybe over 5 years is 60 different buy prices, maybe the monthly input will vary each month. 

It looks like a drama for a person who' just wants something simple. 

The basics aren't that hard, even if you have multiple purchases.

At any point you have a 'pool' containing a known number of shares (or units, if using a fund or OEIC). The pool cost is the total of what you've paid to get those shares; just add up 60 purchase costs, either at the end or as you go along. Your cost per share is the pool cost divided by the number of shares or units. Now when you sell, your capital gain is simply what you receive, minus the cost per share multiplied by the number of shares or units you sold.

So much for the simple case. Here are the complications.

If you hold accumulation units you have to pay annual tax on the dividends, even though you didn't receive then and then factor in these accumulated dividends as an addition to your costs. It can be a pain to keep these straight. Some platforms might not provide this information, meaning you have to search it out.

If you hold non-UK domiciled funds or ETFs (in practice, that would be some funds but all ETFs) you have to factor in 'excess reportable income'. This is income the fund didn't distribute, but which you have to pay tax on anyway but can add to your costs (like accumulated dividends above). Some platforms provide this information, but some do not.

If you hold OEICs part of your dividend might be an 'equalisation'. This is a return of capital; you don't pay tax on this part of your dividend, but you do have to adjust your pool cost for it. Again, platforms don't always account for this when they tell you your pool cost.

If you interleave purchases and sales of the same thing, you have to watch out for the silly 'bed-and-breakfast' trading rule. (Although, if you accidentally sell something, this rule can help you get it back with minimal or no CGT, provided you act quickly enough.)

If you buy the same thing through more than one platform or broker, your platform's indication of your pool cost will be entirely wrong. A pool can span more than one platform or brokerage. Ideally you'd want to avoid doing this, if for no other reason to maintain your own sanity.

A pool is shares or fund units of a single company or fund. If you hold more than one company share or fund, you get to repeat all the above for each separate share or fund pool.

Losses taken in a year can offset your gains, but may cause you to also forgo your annual CGT allowance, if you don't have enough realised gains to more than counter the losses in the same year.

The bottom line with all of this is that you cannot rely on either HMRC or your platform or broker to keep the numbers straight or to optimise your tax position. So you either become a spreadsheet whizz, or you spend a lot of time stapling paper contract notes into a folder and digging through them later with calculator in hand, or you employ someone to do all of this for you.

A common problem case is where someone has accumulated holdings of something in dribs and drabs over many years, but didn't keep good records. The issues only show up when they want to sell; this is when CGT moves from the abstract or theoretical to the concrete.

A CGT allowance of £12k or so tended to keep many of these problem cases from being actual headaches. The repeated reductions in it change the dynamic considerably. And it is strange, and illogical, that on the one hand the chancellor complains that not enough people invest in UK stocks, and then on the other hand, straightaway turns round and makes it harder and less profitable to do exactly that. Kind of like: the beatings will continue until morale improves.