Rationalising a portfolio and Capital Gains Tax

Early_Retire_Free

Outside of my SIPP and ISA's we have a general investment account that has been added to over the last 20 years or so and now has around 80 holdings.  Most of the value is in funds but there are some individual stocks in there and there is a fair degree of overlap.  I would love to slim this down to around 10-15 holdings my issue is that, while there are some loss makers in overall there is considerable profit and the total value of the portfolio is around £1.2 million.  Is there anything I can do while not paying (too much) capital gains tax?

DRS1

Are you married?  Would gifts of shares/funds to the spouse with the lower tax rate help?

Obviously there is the £3k CGT allowance each year.!

EdSwippet

If this were me, I would cover off as much rationalisation as is possible while paying no CGT, and then stop. Sell losers and winners to match (including the miserly £3k allowance), disposing first of the single company stocks and moving the money instead into diversified funds.

After this, live with the overlaps.  Tidiness is nice to have, but not worth paying a lot of tax to achieve.

In some circumstances overlap is a tax management advantage. I deliberately hold HSBC, Vanguard, and Fidelity all-world trackers, even though they fully duplicate. The reason is that each has a different cost basis. I started with just HSBC. Once that grew to be around 30% gain, I switched new money and dividend reinvestment to Vanguard. That gave me two 'tax lots' (two section 104 pools), with the cost basis in the second much higher than the first. So if I need to sell for any reason, there is less CGT to pay if starting with the second one (last in first out). Repeat with Fidelity once Vanguard unrealised gain is large. And so on.

Early_Retire_Free

DRS1 said:

Are you married?  Would gifts of shares/funds to the spouse with the lower tax rate help?

Obviously there is the £3k CGT allowance each year.!

Actually all our investments are already in my wife's name!

westv

It might also be worth asking this question in the Savings & Investment board.

DRS1

Early_Retire_Free said:

DRS1 said:

Are you married?  Would gifts of shares/funds to the spouse with the lower tax rate help?

Obviously there is the £3k CGT allowance each year.!

Actually all our investments are already in my wife's name!

So I guess she pays the lower rate of tax.  Still you have your own £3k so perhaps a small gift from her to you may help.  Just so you can realise a gain within the allowance.  Maybe that is the tax tail wagging the dog?

kempiejon

If we are going to let the tax tail wag the dog one could start with the questions where will tax on these investments be in 10 years time higher or lower?
Investing unsheltered one has to keep an eye on the prevailing tax environment. The changes to tax on dividends along with the reduction of capital gains have been well signalled, selling and repositioning of portfolios to mitigate tax and changes going forward is a good skill to collect even if the chances have been missed previously.
Still with a big pot it'll take a long time even with 2 of you.
Inheritance resets capital gains doesn't it...