CGT 30 day rule in a see-sawing market

NickBFS

I wanted to check if my understanding of how the 30 day rule for CGT works is correct.

Let us say that I buy shares for £20,000. 3 months later, the price has not moved and I sell these shares for £20,000. A couple of weeks later, the price falls and I re-buy those same shares for £18,000. Six months later, I sell the shares for £22,000. 

For CGT purposes, the taxable gain on the second sale of those shares will be £2,000 (£22,000-£20,000) (and not 22,000-18,000=£4,000) as the first sale and repurchase were within 30 days (whereas the second sale was outside it). Is that correct?

masonic

Not quite. The first sale is matched to the second purchase (as it was within 30 days), giving you a £2000 reduction to the cost basis of the original purchase. Then the second sale is matched to the first purchase, giving a gain of £4000. This difference matters when the first sale was not at the same price as the first purchase. For example, if the first sale was for £19,000, the gain would be £3000 ([£19000-£18000] + [£22,000-£20,000]), not £2000 (£22,000-£20,000).

Edit: These workings are incorrect, should be treated as two separate disposals, see below

NickBFS

I am not sure I follow: given that the first purchase was for £20,000 and that the second sale was £22,000, how can matching the second sale to the first purchase result in a £4000 gain?

Re-reading the rules again, I think that the calculation of a taxable gain of £2000 on the second sale is correct. However, what I missed is that there is also a taxable gain of 2,000 on the first sale since the first sale (20,000) is matched to the second purchase (18,0000), resulting in a 20000-18000=2000 taxable gain (rather than loss)

Or am I still barking the wrong tree, again?

TheGreenFrog

My understanding is as follows:

1st disposal:  would normally be matched to shares bought before.  But as shares were rebought withing 30 days the sale is matched with the later purchase.  So gain of £2,000 on first sale. 

You still have your shares but the base cost of them is £20,000 as the shares you have are for CGT purposes the ones you bought first time. 

2nd disposal:  Base cost is £20k and disposal is £22k so gain is £2k.

https://www.gov.uk/government/publications/shares-and-capital-gains-tax-hs284-self-assessment-helpsheet/hs284-shares-and-capital-gains-tax-2022

masonic

TheGreenFrog said:

My understanding is as follows:

1st disposal:  would normally be matched to shares bought before.  But as shares were rebought withing 30 days the sale is matched with the later purchase.  So gain of £2,000 on first sale. 

You still have your shares but the base cost of them is £20,000 as the shares you have are for CGT purposes the ones you bought first time. 

2nd disposal:  Base cost is £20k and disposal is £22k so gain is £2k.

https://www.gov.uk/government/publications/shares-and-capital-gains-tax-hs284-self-assessment-helpsheet/hs284-shares-and-capital-gains-tax-2022

Looks like I have indeed misunderstood the consequences of matching under B&B rules. There is a much clearer explanation here showing that it is indeed a disposal using the repurchase cost as the acquisition cost: https://techzone.abrdn.com/public/personal-taxation/Practical-G-Share-match#anchor_1