18% CGT - how are you responding?

masonic

aroominyork said:

EthicsGradient said:

For a few years, I've been selling unsheltered active OEICs, with the capital gains they incur taking me up to the basic rate band maximum, to put into passive (ie lower-charge) index trackers, in an ISA where possible. This year I did all that before the Budget, since people warned the "sell before/after" rule could apply, as it now does.

Having done that, I've now realised I could still use the whole year's £3k allowance, plus a small capital loss I've already incurred, and use that to offset another capital gain, with the gains I've already made before the Budget still paying the 10% rate. What this would do is push my total income above the basic rate band, however - unless I make a charitable donation this year, and the Gift Aid increases the band to back above the total income+capital gains. So I'm doing that, and a lucky charity or two will get a donation I might not have made until next year.

With the new 18% rate, I reckon taking the CGT hit won't be worth it for the lower charges from the index trackers any more (it changes from what might be a 7 year payback to a 13 year one). So I probably won't be filling up my basic band in the future, and will keep the active funds, just using the £3k allowance each year.

Are you saying that instead of £3k of pre-budget gains using up your allowance and any post-budget gains being taxed at 18%, you can pay 10% CGT on our pre-budget sales and pay no CGT on £3k of post-budget sales? Wouldn't that depend on how HMRC set up the FY25 self-assessment software? 

See https://forums.moneysavingexpert.com/discussion/comment/81081239/#Comment_81081239 from your other thread.

aroominyork

masonic said:

aroominyork said:

EthicsGradient said:

For a few years, I've been selling unsheltered active OEICs, with the capital gains they incur taking me up to the basic rate band maximum, to put into passive (ie lower-charge) index trackers, in an ISA where possible. This year I did all that before the Budget, since people warned the "sell before/after" rule could apply, as it now does.

Having done that, I've now realised I could still use the whole year's £3k allowance, plus a small capital loss I've already incurred, and use that to offset another capital gain, with the gains I've already made before the Budget still paying the 10% rate. What this would do is push my total income above the basic rate band, however - unless I make a charitable donation this year, and the Gift Aid increases the band to back above the total income+capital gains. So I'm doing that, and a lucky charity or two will get a donation I might not have made until next year.

With the new 18% rate, I reckon taking the CGT hit won't be worth it for the lower charges from the index trackers any more (it changes from what might be a 7 year payback to a 13 year one). So I probably won't be filling up my basic band in the future, and will keep the active funds, just using the £3k allowance each year.

Are you saying that instead of £3k of pre-budget gains using up your allowance and any post-budget gains being taxed at 18%, you can pay 10% CGT on our pre-budget sales and pay no CGT on £3k of post-budget sales? Wouldn't that depend on how HMRC set up the FY25 self-assessment software? 

See https://forums.moneysavingexpert.com/discussion/comment/81081239/#Comment_81081239 from your other thread.

Is that definitely saying what you suggest... that the FY25 self-assessment form will ask us to specify to which 'half' of the year we want to allocate the £3k allowance (as well as any losses)? 

masonic

aroominyork said:

masonic said:

aroominyork said:

EthicsGradient said:

For a few years, I've been selling unsheltered active OEICs, with the capital gains they incur taking me up to the basic rate band maximum, to put into passive (ie lower-charge) index trackers, in an ISA where possible. This year I did all that before the Budget, since people warned the "sell before/after" rule could apply, as it now does.

Having done that, I've now realised I could still use the whole year's £3k allowance, plus a small capital loss I've already incurred, and use that to offset another capital gain, with the gains I've already made before the Budget still paying the 10% rate. What this would do is push my total income above the basic rate band, however - unless I make a charitable donation this year, and the Gift Aid increases the band to back above the total income+capital gains. So I'm doing that, and a lucky charity or two will get a donation I might not have made until next year.

With the new 18% rate, I reckon taking the CGT hit won't be worth it for the lower charges from the index trackers any more (it changes from what might be a 7 year payback to a 13 year one). So I probably won't be filling up my basic band in the future, and will keep the active funds, just using the £3k allowance each year.

Are you saying that instead of £3k of pre-budget gains using up your allowance and any post-budget gains being taxed at 18%, you can pay 10% CGT on our pre-budget sales and pay no CGT on £3k of post-budget sales? Wouldn't that depend on how HMRC set up the FY25 self-assessment software? 

See https://forums.moneysavingexpert.com/discussion/comment/81081239/#Comment_81081239 from your other thread.

Is that definitely saying what you suggest... that the FY25 self-assessment form will ask us to specify to which 'half' of the year we want to allocate the £3k allowance (as well as any losses)? 

I've not made any suggestions. I've simply linked to a post where somebody else has quoted a policy paper. I have not gone and verified the source myself, but you should do so before you act on it.

boingy

I've always found it odd that CGT is the same regardless of the timeframe. It feels like there should be some sort of index-linked relief when you sell a long-term holding. It seems a bit ridiculous that you are incentivised to sell and buy part of your holding(s) each year to mitigate the longer term tax bill, lining the pockets of brokers and middlemen.

Not that it affects me any more. These days all my investments are inside pensions and ISAs. And we should probably reflect on how generous the annual ISA allowance is. I half-expected it to get nerfed in the budget last week.

SkylineExplorer

A tricky one with the CGT increase, I’m leaning towards staggering sales over 3 or 4 years to stay in the allowance but the 18% buster really makes it harder to predict. I would like to know what creative methods other folks have used to minimize the impact

aroominyork

masonic said:

aroominyork said:

masonic said:

aroominyork said:

EthicsGradient said:

For a few years, I've been selling unsheltered active OEICs, with the capital gains they incur taking me up to the basic rate band maximum, to put into passive (ie lower-charge) index trackers, in an ISA where possible. This year I did all that before the Budget, since people warned the "sell before/after" rule could apply, as it now does.

Having done that, I've now realised I could still use the whole year's £3k allowance, plus a small capital loss I've already incurred, and use that to offset another capital gain, with the gains I've already made before the Budget still paying the 10% rate. What this would do is push my total income above the basic rate band, however - unless I make a charitable donation this year, and the Gift Aid increases the band to back above the total income+capital gains. So I'm doing that, and a lucky charity or two will get a donation I might not have made until next year.

With the new 18% rate, I reckon taking the CGT hit won't be worth it for the lower charges from the index trackers any more (it changes from what might be a 7 year payback to a 13 year one). So I probably won't be filling up my basic band in the future, and will keep the active funds, just using the £3k allowance each year.

Are you saying that instead of £3k of pre-budget gains using up your allowance and any post-budget gains being taxed at 18%, you can pay 10% CGT on our pre-budget sales and pay no CGT on £3k of post-budget sales? Wouldn't that depend on how HMRC set up the FY25 self-assessment software? 

See https://forums.moneysavingexpert.com/discussion/comment/81081239/#Comment_81081239 from your other thread.

Is that definitely saying what you suggest... that the FY25 self-assessment form will ask us to specify to which 'half' of the year we want to allocate the £3k allowance (as well as any losses)? 

I've not made any suggestions. I've simply linked to a post where somebody else has quoted a policy paper. I have not gone and verified the source myself, but you should do so before you act on it.

I didn't mean 'suggest' as recommending; I meant is that what the quote intimates (if you know what I mean...). The quote is correct (see here) so my question is how this plays out in practice... would the FY25 self-assessment form ask us to specify to which 'half' of the year we want to allocate the £3k allowance (as well as any losses)?

PS  The alternative strategy is to wait for a market correction and then sell without a capital gain but, as we are often reminded, investments can rise as well as fall in value so you could get back more than you put in!

dales1

The HMRC statement says, quote:

"The existing provisions under which losses, the Annual Exempt Amount and any unused income tax basic rate band can be used in the most beneficial way will remain in place, with amendments to reflect the changed rates"

The way I read it is that HMRC will code it in their software, to give you the best outcome from your SA form.

... That's just as they do at present, for allocating the personal allowance across income, interest and dividends, to give the best outcome. (That calculation is a bit tricky to follow, but they've coded it OK for me anyway).

masonic

aroominyork said:

masonic said:

aroominyork said:

masonic said:

aroominyork said:

EthicsGradient said:

For a few years, I've been selling unsheltered active OEICs, with the capital gains they incur taking me up to the basic rate band maximum, to put into passive (ie lower-charge) index trackers, in an ISA where possible. This year I did all that before the Budget, since people warned the "sell before/after" rule could apply, as it now does.

Having done that, I've now realised I could still use the whole year's £3k allowance, plus a small capital loss I've already incurred, and use that to offset another capital gain, with the gains I've already made before the Budget still paying the 10% rate. What this would do is push my total income above the basic rate band, however - unless I make a charitable donation this year, and the Gift Aid increases the band to back above the total income+capital gains. So I'm doing that, and a lucky charity or two will get a donation I might not have made until next year.

With the new 18% rate, I reckon taking the CGT hit won't be worth it for the lower charges from the index trackers any more (it changes from what might be a 7 year payback to a 13 year one). So I probably won't be filling up my basic band in the future, and will keep the active funds, just using the £3k allowance each year.

Are you saying that instead of £3k of pre-budget gains using up your allowance and any post-budget gains being taxed at 18%, you can pay 10% CGT on our pre-budget sales and pay no CGT on £3k of post-budget sales? Wouldn't that depend on how HMRC set up the FY25 self-assessment software? 

See https://forums.moneysavingexpert.com/discussion/comment/81081239/#Comment_81081239 from your other thread.

Is that definitely saying what you suggest... that the FY25 self-assessment form will ask us to specify to which 'half' of the year we want to allocate the £3k allowance (as well as any losses)? 

I've not made any suggestions. I've simply linked to a post where somebody else has quoted a policy paper. I have not gone and verified the source myself, but you should do so before you act on it.

I didn't mean 'suggest' as recommending; I meant is that what the quote intimates (if you know what I mean...). The quote is correct (see here) so my question is how this plays out in practice... would the FY25 self-assessment form ask us to specify to which 'half' of the year we want to allocate the £3k allowance (as well as any losses)?

PS  The alternative strategy is to wait for a market correction and then sell without a capital gain but, as we are often reminded, investments can rise as well as fall in value so you could get back more than you put in!

It will be necessary for taxpayers to provide figures for disposals either side of the boundary separately. The statement suggests that the annual allowance and any loss relief would be applied first to this side of the boundary, then to the other.

TBC15

Over the years we have always made use of the CGT allowance to help reset gains in our GI accounts, pay for the years ISA and recently post retirement fill the cash bucket for the year.

This year will be the first year we have made a conscious decision to pay CGT when we maxed out the 10% band.

Next year after maxing out the 18% band and feeding the ISAs and cash bucket any residue will probably get turned into gold Britannia’s. It’s just a shame gold is at a record high at the moment and the postal insurance on gold coins adds a cost.