Offsetting CGT - will this work?

simpson_77

Hi,

The situation is I have quite a few investments outside of an ISA wrapper due to ISA's being maxed each year. With a high potential for CGT to change in October and to become more tax efficient I'm think of doing the following with my investments - note I'm a 45% tax payer and my wife earns circa £5k pa self employed.

Existing portfolio not tax protected:

• IG: £67k value with £20k profit  (£19k + £3.5k on 2 holdings and £2,700 loss on 3rd holding)
• HL: £13k value running at a £4k loss (£17k initial investment)
• Work shares: £80k with £25k profit

My strategy is to sell HL with a £4k loss, offset the £4k against the £20k from IG which leaves £16k. I then maximise my CGT allowance for this year of £3k. This leaves £13k. I then transfer the remaining shares to my wife to max her CGT threshold, which leaves £10k tax liable in my wife names. These can then be sold with the CGT payable by her (or would it add to her income?) or we leave them as is and wait to April 25 and bed and ISA.

The work shares will need to be transferred into my wife's names at some point and start being put into an ISA.

Is this the best way to do it, or is there a more tax efficient way? We do have 4 children 8,11,15 and 17 - is it worth opening ISA's for them and doing a bed and ISA, BUT will we lose ownership?

We don't need the cash now so can play the long game  - probably retire in 8-10 years.

Thanks,

Bighitter32

Assuming you trust your wife….. 😀….. whatever you chose to do, managing across two allowances makes sound sense.

EthicsGradient

As JamesRobinson48 says, think about "the base investment case for buying/holding/selling, which obviously is far more important than CGT.  We shan't let the tax tail wag the investment dog" first. Which of those holdings do you want to hold on to somewhere (eg in ISAs), and which do you actually want to sell now and use the money for something else? Then you can know if you can sell some this year without thinking about ISA allowances, and which need to wait till next year for you and your wife's ISA allowances.

If you think each investment is likely to appreciate a bit in the future, then, as a principle, it's normally worth selling things that are at the biggest losses, and smallest gains, now, or as soon as allowances allow - because an incremental rise in their value will affect their loss/gain more than the same percentage rise in an investment that already consists largely of a gain. So knowing what the costs of the 19k gain, 3.5k gain and 2.7k loss investments are, could also help how to work out the best order.