Tax on selling shares

Greenstar62

poseidon1 said:

If indeed HMRC' s response to you was exactly as you state, then pretty much everything you were told was  wrong.

So:

1) You are potentially taxable on the difference between the probate value of the IHG shares you inherited, and the gain that accumulated by the time you sell.

2) Only if that gain exceeds your CGT allowance of £3000 ( current year). Will you have an 10% tax liability on the residual gain.  10% rate is for basic rate payers, had you been higher rate, cgt would be 20%.  The 8.5% rate you quote actually relates to dividends received  from shareholdings, so I do wonder ( being charitable) whether there was a fundamental misunderstanding between you and HMRC of what you were asking. As regards IHG dividends, have you declared these in the past?

3) A taxable gain in this tax year   ( 2024 /25), is reportable to HMRC by 31 December 2025 with the tax payable by 31 January 2026.

Please confirm the probate price at which you inherited, and a 'back of a fag pack' estimate of the current gain can be calculated, together with the tax. I assume for this purpose you have made no other disposal of assets liable to CGT?

Incidentally  it is as well to note that if selling the shares does trigger a significant gain above your £3000 exemption, you could reduce what you sell now and sell the rest at the start of the new tax year 2025/26. Of course that does risk the share price falling in the interim!

Thank you. That is very clear and very helpful. I didn't make any other disposals of assets liable to CGT.

The shares were worth £8,388 at probate and are now worth £13,987. I will sell up to the £3000 exemption - it sounds like the best thing for me. I hadn't considered the new tax year meant a new £3000 exemption. If the share price falls, at least I won't have paid CGT.

How do I report to HMRC? I'm concerned about phoning them and being given wrong information again (though, As forum replies have suggested, I may not have explained the situation correctly).

Many thanks again.

Greenstar62

ColdIron said:

Greenstar62 said:

Please could someone explain how I work out the £3K exemption? The shares were worth £8388 at probate and are now worth £13987 - a gain of £5,599

£5.599 divided by 172 is a gain of £32.55 per share

If you sold all of them your taxable gain would be: £5,599 - £3,000 = £2,599 * 10% = £259.90 tax

If you sold 92 shares, 92 * £32.55, your gain of £2,995 would be within the £3,000 Annual Exempt Amount. You could sell the balance in the next financial year

Changes to CGT (rate, allowance etc) is widely expected in the upcoming Labour budget 30/10/2024

Really helpful. Thank you.

I did both my parents' probate, 16 years apart, so I can work out these things. I'm just unaccustomed to tax issues.

Greenstar62

Keep_pedalling said:

If you sell just enough to keep your gain at no more than £3000 you will owe no CGT and have nothing to report. Sell the rest after April 5th next year. The risk is that they go down more than 10% before then so you could be a little bit worse off.

Thank you. I will do that.

I find it bizarre that the share prices have gone up so much in less than 3 years, but I suppose that's how it goes...

Greenstar62

MeteredOut said:

Greenstar62 said:

Both really helpful. Thank you.

Please could someone explain how I work out the £3K exemption? The shares were worth £8388 at probate and are now worth £13987 - a gain of £5,599.

Thank you again.

If you sell them now for £13,987, you've made a gain of £5,599. Assuming you've no other captial gains in this tax year, £3,000 is tax-exempt, and you should pay capital gains tax on the remaining £2,599. With your salary, I'd expect that to be 10% as a basic rate tax payer (£259.90).

There are strong rumours that CGT could be "tweaked" in the October 30 budget. Most recommendations are not to change what you plan to do based on rumours, but if you plan to sell anyway, I'd certainly consider doing it before then.

Delaying the sale to the next tax year would not reduce your CGT (and could increase it if the allowance is lowered in the budget), though you could also sell enough now to use up your £3K CGT allowance for this year, hope the limit does not reduce drastically, and then sell the remainder in the 2025/26 tax year, using that years allowance.

Here's the link detailing how to pay CGT: https://www.gov.uk/report-and-pay-your-capital-gains-tax/ways-to-pay

That's a really useful perspective. Thank you. I hadn't considered the budget. I'll sell enough shares to keep gain below £3000 before 30 October. 

ColdIron

Greenstar62 said:

poseidon1 said:

If indeed HMRC' s response to you was exactly as you state, then pretty much everything you were told was  wrong.

So:

1) You are potentially taxable on the difference between the probate value of the IHG shares you inherited, and the gain that accumulated by the time you sell.

2) Only if that gain exceeds your CGT allowance of £3000 ( current year). Will you have an 10% tax liability on the residual gain.  10% rate is for basic rate payers, had you been higher rate, cgt would be 20%.  The 8.5% rate you quote actually relates to dividends received  from shareholdings, so I do wonder ( being charitable) whether there was a fundamental misunderstanding between you and HMRC of what you were asking. As regards IHG dividends, have you declared these in the past?

3) A taxable gain in this tax year   ( 2024 /25), is reportable to HMRC by 31 December 2025 with the tax payable by 31 January 2026.

Please confirm the probate price at which you inherited, and a 'back of a fag pack' estimate of the current gain can be calculated, together with the tax. I assume for this purpose you have made no other disposal of assets liable to CGT?

Incidentally  it is as well to note that if selling the shares does trigger a significant gain above your £3000 exemption, you could reduce what you sell now and sell the rest at the start of the new tax year 2025/26. Of course that does risk the share price falling in the interim!

How do I report to HMRC? I'm concerned about phoning them and being given wrong information again (though, As forum replies have suggested, I may not have explained the situation correctly).

You shouldn't need to

If your total gains are less than the tax-free allowance

You do not have to pay tax if your total taxable gains are under your Capital Gains Tax allowance.

You still need to report your gains in your tax return if both of the following apply:

• the total amount you sold the assets for was more than £50,000
• you’re registered for Self Assessment

These rules apply from the 2023 to 2024 tax year onwards.

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

poseidon1

Greenstar62 said:

And do I contact HMRC to tell them? (I don't complete a tax return).

Seems your CGT position comprehensively covered.

Coming back to dividends received from IHG since 2022, if you have never personally declared these and paid income tax thereon ( you haven't done an annual tax return),  you might want to think about a voluntary disclosure. Once you sell the shares and report any gain, HMRC just might put two and two together about any non reported dividends.