Declaring Capital Gains on US Stock in Self Assessment

milleniumaire

Just completing my 2023/24 self assessment and for the first time I have to declare some capital gains.  In previous years my wife and I would sell just enough to use up our CGT allowance so we avoided paying tax on capital gains, but for this tax year, not only has the CGT allowance been slashed, but we have also needed to sell a lot more shares.

The shares are in a US company, but held within a Hargreaves Lansdown Stocks and Shares account, so the proceeds of the sales are in pounds.

Which section of the self assessment should these gains be reported in?  I had assumed it would be the Foreign section as I'm used to declaring US dividends in this section and the stock is foreign.  Having entered the gains, looking at the calculation I notice it treats the gain amount as "Income" and therefore applies a much higher tax rate (split between 20% basic rate and 40% higher rate).  I thought capital gains tax was 20% for a high rate tax payer.

If, as an experiment, I removing the foreign capital gains amount and instead enter it into the Disposed chargeable assets section of the SA, I see it then applies 20% to the gain amount.  Needless to say, this method of entering the gains results in a much lower tax bill, but I'm not convinced this is the correct way to declare them?

Is it correct that foreign gains are treated as income and taxed at 40%, rather than being treated as gains and taxed at 20%?

DRS1

I may be wrong aren't the Foreign Pages just for income?  There is a note which says

"Do not use the ‘Foreign’ pages for:

• capital gains from the disposal of overseas assets 

– use the ‘Capital Gains Tax summary’ pages"

FlaatusGoat

Alright, so I’ve been looking into this, and honestly, I totally get why you’re confused. Taxes are such a pain, especially when you’re dealing with capital gains and foreign stuff. It’s like they’re set up to make it as complicated as possible just to stress us all out. Anyway, here’s what’s going on and what you probably need to do.

So first off, the shares you sold, even though they’re from a US company, are held in a UK-based account (Hargreaves Lansdown). That means the gains from selling them are considered UK capital gains for tax purposes, not foreign income. It’s not like dividends where they’re counted as foreign income because they’re paid out by a US company. When you sell shares, it’s about where the transaction happens and how it’s taxed in the UK. Since this is all under Hargreaves Lansdown, you’re dealing with UK capital gains tax rules, not foreign income tax rules.

That means you should be entering the gains into the "Disposed chargeable assets" section of the self-assessment. This is where you report any sales of assets, like shares, property (not your main home), or anything else that counts for capital gains tax. When you put it in that section, it’ll calculate the tax properly—10% if you’re a basic rate taxpayer and 20% if you’re in the higher rate band. That’s why, when you tested it, the tax calculation came out lower in that section. It’s because that’s the correct way to report it.

Now, about the Foreign section—it’s totally understandable why you thought it might go there. If you’re used to putting US dividends in the Foreign section, it makes sense that you’d think the same applies here. But dividends and capital gains are taxed differently. Dividends are treated as income, so when they’re from a US company, they go in the Foreign section and might even have some withholding tax involved. Gains from selling shares, though, are not treated as income. They’re taxed under the capital gains rules, so they belong in the Disposed chargeable assets section. If you report them as foreign income, the system will think it’s actual income and tax it at your marginal income tax rate (which could be 40% or more). That’s why the tax bill shot up when you tried it in the Foreign section. It’s treating it as if you earned the gain like a salary or dividend, which is not right.

As for the whole CGT allowance being slashed this year, yeah, it’s super annoying. It used to be a lot easier to avoid paying any tax by just selling enough shares to stay within the allowance. But with the new lower limit, a lot more people are getting caught in the CGT net, especially if you’ve had to sell a lot more shares. It sucks, but it’s just something we all have to deal with now. At least the tax rate for capital gains is lower than for income, so it’s not as bad as it could be.

One thing to double-check is the exchange rate you’re using. Since the shares are in a US company, the purchase price and sale price might originally be in dollars. For UK tax purposes, you need to convert these amounts to pounds using the official exchange rate at the time of each transaction. HMRC usually expects you to use their published rates or a reliable source, so make sure you’re not just guessing the conversion. Getting this wrong could mess up your calculations and potentially cause problems later.

So, to sum it up (because I know this is a lot), the gains should go in the Disposed chargeable assets section, not the Foreign section. That’s how the system knows to treat them as capital gains and apply the correct tax rate. Foreign gains are not taxed as income unless they actually are income (like dividends). If you’re still unsure, it might be worth checking with an accountant or calling HMRC just to confirm, but I’m pretty confident this is the right way to do it.

Hopefully, this clears it up a bit. Honestly, taxes are such a hassle, but once you figure out where everything goes, it’s not too bad. You’ve just got to keep everything organized and double-check the rules, especially when it comes to foreign stuff. Anyway, good luck with your self-assessment!

Bookworm105

DRS1 said:

I may be wrong aren't the Foreign Pages just for income?  There is a note which says

"Do not use the ‘Foreign’ pages for:

• capital gains from the disposal of overseas assets 

– use the ‘Capital Gains Tax summary’ pages"

neat summary of the correct position 

GingerTim

FlaatusGoat said:

Alright, so I’ve been looking into this, and honestly, I totally get why you’re confused. Taxes are such a pain, especially when you’re dealing with capital gains and foreign stuff. It’s like they’re set up to make it as complicated as possible just to stress us all out. Anyway, here’s what’s going on and what you probably need to do.

So first off, the shares you sold, even though they’re from a US company, are held in a UK-based account (Hargreaves Lansdown). That means the gains from selling them are considered UK capital gains for tax purposes, not foreign income. It’s not like dividends where they’re counted as foreign income because they’re paid out by a US company. When you sell shares, it’s about where the transaction happens and how it’s taxed in the UK. Since this is all under Hargreaves Lansdown, you’re dealing with UK capital gains tax rules, not foreign income tax rules.

That means you should be entering the gains into the "Disposed chargeable assets" section of the self-assessment. This is where you report any sales of assets, like shares, property (not your main home), or anything else that counts for capital gains tax. When you put it in that section, it’ll calculate the tax properly—10% if you’re a basic rate taxpayer and 20% if you’re in the higher rate band. That’s why, when you tested it, the tax calculation came out lower in that section. It’s because that’s the correct way to report it.

Now, about the Foreign section—it’s totally understandable why you thought it might go there. If you’re used to putting US dividends in the Foreign section, it makes sense that you’d think the same applies here. But dividends and capital gains are taxed differently. Dividends are treated as income, so when they’re from a US company, they go in the Foreign section and might even have some withholding tax involved. Gains from selling shares, though, are not treated as income. They’re taxed under the capital gains rules, so they belong in the Disposed chargeable assets section. If you report them as foreign income, the system will think it’s actual income and tax it at your marginal income tax rate (which could be 40% or more). That’s why the tax bill shot up when you tried it in the Foreign section. It’s treating it as if you earned the gain like a salary or dividend, which is not right.

As for the whole CGT allowance being slashed this year, yeah, it’s super annoying. It used to be a lot easier to avoid paying any tax by just selling enough shares to stay within the allowance. But with the new lower limit, a lot more people are getting caught in the CGT net, especially if you’ve had to sell a lot more shares. It sucks, but it’s just something we all have to deal with now. At least the tax rate for capital gains is lower than for income, so it’s not as bad as it could be.

One thing to double-check is the exchange rate you’re using. Since the shares are in a US company, the purchase price and sale price might originally be in dollars. For UK tax purposes, you need to convert these amounts to pounds using the official exchange rate at the time of each transaction. HMRC usually expects you to use their published rates or a reliable source, so make sure you’re not just guessing the conversion. Getting this wrong could mess up your calculations and potentially cause problems later.

So, to sum it up (because I know this is a lot), the gains should go in the Disposed chargeable assets section, not the Foreign section. That’s how the system knows to treat them as capital gains and apply the correct tax rate. Foreign gains are not taxed as income unless they actually are income (like dividends). If you’re still unsure, it might be worth checking with an accountant or calling HMRC just to confirm, but I’m pretty confident this is the right way to do it.

Hopefully, this clears it up a bit. Honestly, taxes are such a hassle, but once you figure out where everything goes, it’s not too bad. You’ve just got to keep everything organized and double-check the rules, especially when it comes to foreign stuff. Anyway, good luck with your self-assessment!

Obvious AI bilge.

flaneurs_lobster

GingerTim said:

Obvious AI bilge.

Then why quote the whole thing again?

milleniumaire

FlaatusGoat said:

Alright, so I’ve been looking into this, and honestly, I totally get why you’re confused. Taxes are such a pain, especially when you’re dealing with capital gains and foreign stuff. It’s like they’re set up to make it as complicated as possible just to stress us all out. Anyway, here’s what’s going on and what you probably need to do.
...

Hopefully, this clears it up a bit. Honestly, taxes are such a hassle, but once you figure out where everything goes, it’s not too bad. You’ve just got to keep everything organized and double-check the rules, especially when it comes to foreign stuff. Anyway, good luck with your self-assessment!

Thanks @FlaatusGoat that is a perfect explanation of what I need to do.

I had found a post on the HMRC Community Forums, which steered me in the right direction and had already realised I needed to declare them in the Capital Gains Tax Summary pages (aka SA108), which now makes perfect sense.  Your explanation of my historical use of the Foreign pages (aka SA106) is exactly correct as I've been declaring US dividends for years.

One thing I've also realised, I was planning to only declare the sale of the US stock that I know is subject to capital gains tax, but it would appear I also need to declare some UK shares that were sold to only utilise my CGT allowance.  Without declaring the sale of these UK shares I see my £6k CGT allowance is deducted from the US gains and this isn't correct as the gains on my US stock sale is fully taxable.

I see also that I need to upload documents showing the calculations.  Not an issue for my US stock as I've been buying/selling these for nearly 30 years and have a spreadsheet keeping track of the "Pool of Actual Cost in UK Pounds", which was developed in conjunction with HMRC when I first started investing in US stock.  However, the UK stock gains are determined by my broker so I will need to get proof from them.

A couple of HMRC Community Forum posts I found that have helped me and may help others:

https://community.hmrc.gov.uk/customerforums/cgt/d34cdd4f-a81c-ee11-a81c-000d3a0d1621

https://community.hmrc.gov.uk/customerforums/cgt/6282f4ea-1626-ee11-a81c-000d3a0d1621#:~:text=The%20foreign%20gain%20is%20added,and%20enter%20in%20box%202.