How best to avoid tax on investment gains outside of an ISA

EthicsGradient

"This comment is very interesting EthicsGradient.  For example, IF the unsheltered fund had a bumper year and looked to go £10k over CG allowance, could you sell £10,001 to remain from paying tax?"

Any tax on capital gains only happens in the year you sell, and only on the gain of the part you sell. The idea is to sell enough (if you're looking for some money to live on) that your realised gain each year is under £3,000.

Say she did invest £15,000 in one fund, and after 3 years, it had grown 50%, to £22,500.  If she then wanted to sell it all then, the capital gain would be £7,500, and some tax payable ((7500-3000)*10%=£450).

But if, after 2 years and 40% growth, she had sold half of it, then her gain in year 2 would be 7500*40%=£3,000, thus using that year's CG allowance with no tax to pay, and very little ((7500*50%-3000)*10%=£75) if she wanted to sell all the rest the next year. If she had sold a little in the first year too, she might avoid any CG tax altogether, though at some point the amount you sell and the tax you avoid may be so small it doesn't seem worth the hassle.

26left

Could buy a low coupon, short term UK Gilt.  No capital gains tax on Gilts.  Interest rate risk is minimal on short term gilts (and zero if held to maturity), and the coupon is low it uses up very little income / savings allowance.  Free to hold on most common investment platforms e.g. Hargreaves Lansdown, just pay the fixed cost to trade i.e. buy - and nothing to pay at maturity.  Yields approx 4% tax free. UK government debt so can hold above £85K as effectively unlimited government guarantee.

e.g. https://www.hl.co.uk/shares/shares-search-results/t/treasury-0.25-31012025-gilt

longwalks1

xylophone said:

From Saturday, even without relevant earnings, she may still contribute £2880 for the new tax year and the provider will claim tax relief of £720 and add it to her pot.

Hello all, just revisiting this thread as wanted to see if any of my questions may be affected by the upcoming budget.  Regarding the paying £2880 into a pension and getting £720 tax relief on it, how is the £720 added?  Automatically, or do you have to remind your SIPP provider?

ColdIron

It will be added automatically