The 30 day CGT rule

aroominyork

Please can I check I understand this. If I sell a fund and re-buy the same number of units within 30 days, for CGT purposes the two trades never happened. I don't declare it on self-assessment and the original base price is unaltered. 

If that is correct, then... if I sell a fund and incur a CGT liability, and within 30 days its price plummets, can I re-buy the same number of units and immediately re-sell them, so that the sale price for CGT purposes is the lower price?

EthicsGradient

It's not that "the two trades never happened", it's that you use the later purchase price as the acquisition cost for the units you sold (if you sell and then buy on the same day, you use that purchase price first; then purchases up to 30 days after the sale; then purchases before the sale).

If you "immediately re-sell them" at the same price as your 2nd purchase, I think you wouldn't gain anything; your 2nd sale  would (I think) be matched against your original, "long-ago" purchase. If the 2nd sale was in a new tax year, perhaps this would enable you to use 2 tax years' allowance, if you had no plans to use it for the rest of the new tax year.

TheGreenFrog

As @EthicsGradient infers, the rule is that you are treated as having sold the shares you acquired later (and at that later cost) rather than shares you actually held on the day of sale (at the cost you acquired them - this would be a pooled cost if you made multiple purchases).  

aroominyork

Thanks. Here is a scenario I will have in the new tax year. Both OH and I will want to move £20k of equity funds (both hold the same global index fund) from our trading accounts to ISAs. To avoid being out of the market, my idea is:
1. Sell £20k of CSH2 in my trading account
2. +2 days, transfer it to my ISA and buy equity fund. Also, sell £20k of OH's trading account equity fund. 
3. +2 days, transfer it to OH's ISA and buy equity fund. Also, sell £20k of my trading account equity fund. 
4. Re-buy £20k of CSH2 in my trading account. 
That avoids being out of the equity market and, if I time it right, means a cost of 0.02-0.03% spread on the MMF (plus a few days' rise in price). Can you please confirm the CGT implications for CSH2; will the buy price to calculate CGT on future sales be the original price or the one I get in stage 4?

poolboy

Yes I am in the 30 day window but with a new tax year looming I am planning on using both years cgt allowance.  Fwiw my gia to isa trades, I hold on to the gia to make a few quid margin as I m in the luxurious position of not relying on asset sales to fund the isa.

They are income shares so at least paying well while I wait.

masonic

aroominyork said:

Thanks. Here is a scenario I will have in the new tax year. Both OH and I will want to move £20k of equity funds (both hold the same global index fund) from our trading accounts to ISAs. To avoid being out of the market, my idea is:
1. Sell £20k of CSH2 in my trading account
2. +2 days, transfer it to my ISA and buy equity fund. Also, sell £20k of OH's trading account equity fund. 
3. +2 days, transfer it to OH's ISA and buy equity fund. Also, sell £20k of my trading account equity fund. 
4. Re-buy £20k of CSH2 in my trading account. 
That avoids being out of the equity market and, if I time it right, means a cost of 0.02-0.03% spread on the MMF (plus a few days' rise in price). Can you please confirm the CGT implications for CSH2; will the buy price to calculate CGT on future sales be the original price or the one I get in stage 4?

If it were the price you get in stage 4, then wouldn't that be a wheeze! All anyone would ever need to do to wipe out their CGT liability would be to sell and re-purchase within 30 days to reset the acquisition cost. The bed and breakfast rule matches the sale with any acquisition that happens in the next 30 day explicitly so that the stage 4 and stage 1 prices are matched in priority to the original acquisition, while the original acquisition price is maintained. See https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg51560 including the worked examples.

aroominyork

No wheeze then. Just realised I have >£20k of TG25 gilt maturing in June so I'll wait and use that. Normally I'm hot off the grid in early April so hopefully the market won't punish me for being a laggard this year. 

TheGreenFrog

aroominyork said:

No wheeze then. Just realised I have >£20k of TG25 gilt maturing in June so I'll wait and use that. Normally I'm hot off the grid in early April so hopefully the market won't punish me for being a laggard this year. 

You could always sell your TG25 on 6 April - in absolute terms the cost may not be that high.  Depends of course on your view of which direction the price of your equity fund will go in between April and June.

aroominyork

TheGreenFrog said:

aroominyork said:

No wheeze then. Just realised I have >£20k of TG25 gilt maturing in June so I'll wait and use that. Normally I'm hot off the grid in early April so hopefully the market won't punish me for being a laggard this year. 

You could always sell your TG25 on 6 April - in absolute terms the cost may not be that high.  Depends of course on your view of which direction the price of your equity fund will go in between April and June.

Yes, I could. The bid/offer spread is £99.22/£99.32 which suggests the cost of cashing in early on £20k of TG25 would be about a tenner. And since I will probably re-invest the maturing gilt funds in T26A which has a lower coupon - ie better for tax - that could be a sensible move.

Sam_666

Strange none commented, but cash funds dont qualify for CGT. They are taxes as income interest.

aroominyork

Sam_666 said:

Strange none commented, but cash funds dont qualify for CGT. They are taxes as income interest.

CSH2 is taxed for CGT, not income. It's a useful anachronism... especially while CGT was 10%.