Changing Shares To Joint Ownership

drlabman

With the reduction in annual dividend allowance to £500 I'll likely have to pay tax on my dividends this year.  So I'm thinking of transferring my shares to joint ownership with my wife to get around this.  My understanding is that we'd then split the dividend(s) between us for tax purposes.  Is that correct?  I've not done this before so is it easy?  Any downsides? The shares are held by Equiniti.

eskbanker

You can move the shares into a joint account, or gift half to a separate sole account in her name, but just to check, have you both used your full ISA allowances, as that's the most obvious way of mitigating tax liabilities?

drlabman

eskbanker said:

You can move the shares into a joint account, or gift half to a separate sole account in her name, but just to check, have you both used your full ISA allowances, as that's the most obvious way of mitigating tax liabilities?

Thanks.  I'll have to look into the mechanics of moving the shares.  No, we haven't used our ISA allowances for the new tax year yet, and I've often thought about whether I could put my shares into an ISA.  I wasn't sure if that means selling them and buying them back?  Again, not sure of the mechanics.

eskbanker

drlabman said:

eskbanker said:

You can move the shares into a joint account, or gift half to a separate sole account in her name, but just to check, have you both used your full ISA allowances, as that's the most obvious way of mitigating tax liabilities?

Thanks.  I'll have to look into the mechanics of moving the shares.  No, we haven't used our ISA allowances for the new tax year yet, and I've often thought about whether I could put my shares into an ISA.  I wasn't sure if that means selling them and buying them back?  Again, not sure of the mechanics.

Yes, moving shares into ISAs involves selling outside the ISA, moving the proceeds into it and then repurchasing within the ISA, often bundled as 'Bed & ISA' - doing this crystallises any capital gains made since acquisition (which is usually a positive thing) but then shields future income and growth from taxation thereafter (which is always a positive thing!).

drlabman

eskbanker said:

drlabman said:

eskbanker said:

You can move the shares into a joint account, or gift half to a separate sole account in her name, but just to check, have you both used your full ISA allowances, as that's the most obvious way of mitigating tax liabilities?

Thanks.  I'll have to look into the mechanics of moving the shares.  No, we haven't used our ISA allowances for the new tax year yet, and I've often thought about whether I could put my shares into an ISA.  I wasn't sure if that means selling them and buying them back?  Again, not sure of the mechanics.

Yes, moving shares into ISAs involves selling outside the ISA, moving the proceeds into it and then repurchasing within the ISA, often bundled as 'Bed & ISA' - doing this crystallises any capital gains made since acquisition (which is usually a positive thing) but then shields future income and growth from taxation thereafter (which is always a positive thing!).

Ah yes.  Not clear about crystallisation of CG though.  Does that mean that there would potentially be CGT due at the point of sale - even though I'd be buying them back?  If so, that would be a nightmare to calculate because I bought the shares via my ex-company's share save scheme - so basically shares were bought for me every month over many years.  Calculating the purchase price for each month would be difficult.  Or maybe that's not what crystallisation means?

Also ... the total value of the shares at the moment is more than the annual ISA allowance, so would it be wiser to Bed & ISA half of them to me (half would be below the ISA limit) and the other half to my wife (if that's even possible).

xylophone

https://www.gov.uk/capital-gains-tax/gifts

ColdIron

Your plan to not exceed the annual ISA limit would work but could create a capital gain in excess of the £3,000 Annual Exempt amount when you sell

To accurately determine your capital gain you would need to establish the weighted average cost per share and sell sufficient to keep your gain below £3,000. If this is not possible and you cannot otherwise determine a cost you could at the very least assume a £0 cost and sell a little less than £3,000 (each?). Using an ISA is always a good idea even if it takes a long time. Your CGT position will likely get worse over time

drlabman

So, am I correct:
1. Putting the shares in joint names with my wife rather than my name only, doesn't trigger anything.  On past performance the annual dividends would be below the new allowance of £500 for each .  That seems easiest but doesn't address future CGT issues.
2. Bed & ISA means CGT on any gains (there will be gain), because of the need to sell first - is that what "crystallising" the gain means?
3.  There's nothing special about Bed & ISA. It's just selling investments outside an ISA, moving the cash into a S&S ISA to buy the same shares back.  Is that correct?
4.  I should have done this before now, because the CGT exemption has now dropped from £6K to £3K. Yes?

ColdIron

1. Yes or you could gift them and she holds them in a separate account, either would allow you to use double the available Annual Exempt amount
2. Broadly yes if the gain exceeds the AEA
   
3. Yes. Bed & ISA is just a process, you can do its yourself. If your ISA will be on the same platform as the shares they may give you a break on the fees, a charge to sell but the repurchase charge may be waived
4. Yes, very much so

drlabman

Here's another one - if I gift some of my shares to my wife and she subsequently sells, is her purchase price the price that I paid, or the price when I gifted them.  I'm guessing the former otherwise that would be a way of avoiding CGT.

ColdIron

You should read the link above, it contains information you may find useful

• Their gain will be calculated on the difference in value between when you first owned the asset and when they disposed of it.