Bed and Breakfast with Shares and US Options Help

infinityx

Hi All

My wife is a UK resident (she doesn't really have any income but I actively trade US shares and options on IBKR on her behalf), we also have ISAs. We do have margin but for now I have kept liquidity very high i.e. i could easily survive a 50% drop in my NAV and not have a margin call.

Most of the long term positions are in the ISA however during March dip as ISAs were already full i opened a IBKR account for my wife and bought a lot of shares in a couple of stocks and these have ballooned to 90% gains. I only found out recently that the CGT liability is only 3k. Now since then i learnt about options and have been buying and selling options for a modest gain approx. 15% since April. I'm fairly conservative i.e. only buying ITM Leaps, Bull call spreads in July 2027, selling covered calls or selling Put options for stocks I already own or don't mind owning at a lower strike.

Given the flip flop in the US with tariffs and everything its worked out well so far. 

However i unfortunately we have built up some positions that i want to hold long term in the isa but now face a tax liability if i sell and buy in ISA. I am not buying anything in my GIA since i am a higher rate tax payer. But my wife doesn't have an income so everything is in her name. 

I want to clarify how HMRC treats Shares and Options in GIA for tax purposes.  I know for ISA there is nothing to worry about.

Here are my key questions related to the GIA account only:

1. Asset Classification/Bed and Breakfast Rules

• Are US shares and US options considered the same asset class for UK tax reporting?
• If my CGT liability this year is well above the £3k limit, can I sell losing positions in March and switch to options (or vice versa) to manage tax exposure?

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2. Tax on Options Trading

• When selling naked puts and calls, do we pay Capital Gains Tax (CGT) or Income Tax?
• For bull call spreads:
• Is each leg treated separately for tax purposes, or as one combined position?
• If treated separately, can I realise a loss on the second leg in March if the spread price is higher, or would I be taxed on the entire proceeds from that leg?
• Alternatively, is it better to close the entire spread if it’s in a loss position?

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3. Timing and Reporting

• How does HMRC treat options that expire worthless—is that considered a disposal for CGT?
• If I’m rolling options weekly or monthly, does each roll count as a separate taxable event?
• For long-dated options (e.g., 18 months out), is tax assessed only when the position is closed, or annually?
• Are there any good online tools to help me manage the UK tax exposure something that can take the activity report form IBKR and auto calculate the tax liability?

Any help would be helpful.

DRS1

Sounds like you need the advice of a tax accountant - your wife may be trading.

Otherwise this may be a starting point for further research
CG55536 - Traded options: tax treatment: summary - HMRC internal manual - GOV.UK

poseidon1

DRS1 said:

Sounds like you need the advice of a tax accountant - your wife may be trading.

Otherwise this may be a starting point for further research
CG55536 - Traded options: tax treatment: summary - HMRC internal manual - GOV.UK

Definitely sounds like trading activities rather than passive investing, in which case HMRC may well consider realised gains to be  trading profits for income tax purposes, so CGT exemption irrelevant. Depending on quantum of profits, could have pushed wife into higher rate income tax. 

 Agree @DRS1, a tax accountant required to navigate the trading rules that seem to have been breached here.

infinityx

Well trading would def be more advantageous since it has a higher personal threshold given she has no income but you are right i think we may need professional advice....

The think is that link doesn't really talk about if you buy shares then sell it and then buy the respective option instead.. e.g. bed and breakfast but for shares to options.. 

DRS1

infinityx said:

Well trading would def be more advantageous since it has a higher personal threshold given she has no income but you are right i think we may need professional advice....

The think is that link doesn't really talk about if you buy shares then sell it and then buy the respective option instead.. e.g. bed and breakfast but for shares to options.. 

Interesting question.  My first thought is the option is a separate asset so B&B would not apply but what if you then exercised the option within 30 days of selling the relevant share.  Probably that would be caught because you have sold and bought back the same share within 30 days.

scoobyjones1

I would think that HMRC would say that option trading is not simple investing. You will need a specialist accountant and / or financial advisor to handle all of that. Using her investment account would not help that, it's clearly you doing the trading and her allowances for CGT or income tax would come into it in accordance with that trading.