Calculating whether any CGT on sale of shares

Kismet_Hardy

Can anyone help me sort out how to do this please? 

I am intending to sell all my shares, which have a total value of around £9-10k. They are shares in 4 companies (Barclays, BT, BP and Lloyds). Most were inherited by my husband in 2001 but placed in my name as he was by far the higher earner at that stage. I think Barclays were not inherited, but I need to check.

I think it is highly unlikely that any CGT will be payable, due to the £3k allowance, but we want to be sure before we sell, as I know that I can transfer some to my husband so that he can sell them to take advantage of both our allowances.    

I know that I have to work out whether the shares have increased in value, but I have two questions I cannot find the answer to on-line.

Firstly, with the inherited shares, is my starting point the date of death of the person who left them to my husband or the date which is on the share certificates?

Secondly, for various periods since I have had the shares, I reinvested the dividend money rather than take the cash. I am assuming I have to take the value of each of the new shares as my starting point, but is this value from the record date, the payment date or the date of the new certificates?

I am sure I shall have more questions, but answers to these two will give me something to work on.      

DRS1

First question - it is the value at date of death (certainly not what is on the certificate).
Second question - not sure the dates matter - the key is what did you pay for the shares.  So if the dividend was £100 and that bought 100 shares then you have 100 shares at a base cost of £1 each.  By the way watch out for part shares - with dividend reinvestment schemes you sometimes find the dividend can't all be spent on whole shares so some of it is carried forward to the next time a dividend is paid.

Kismet_Hardy

Thank you DRS1 - that is really helpful. 

The certificates for the DRIP shares show a share price. Am I correct in assuming that this is the purchase price per share at the date of purchase. If that is correct, for each of the DRIP "bundles" of shares, I look at that price and the price at the date when I sell the shares and multiply the profit or loss by the number of shares? I hope that makes sense.   

  

eskbanker

Kismet_Hardy said:

The certificates for the DRIP shares show a share price. Am I correct in assuming that this is the purchase price per share at the date of purchase.

You should have been issued with some form of contract note or document confirming the details of each reinvestment?

Kismet_Hardy said:

If that is correct, for each of the DRIP "bundles" of shares, I look at that price and the price at the date when I sell the shares and multiply the profit or loss by the number of shares?

No, you can't treat them as separate bundles, you have to treat them as one pool and work out a weighted average acquisition cost, i.e. total cost of all shares (per company) divided by total acquisition cost, rather than doing this on subsets.

Kismet_Hardy

Yes, I have some sheets headed Your Purchase Information - unfortunately not for all the DRIP purchases. However, I think I might be able to get that information from my online account.

I just need a bit of time to get my head around your second paragraph 

Kismet_Hardy

Okay, so my mind has been truly blown. Can someone give me a little bit more help please?

The date of death is 28/8/2001 and the first certificate is for 316 shares. The value per share at that time was £5.93. I now have 382 shares, so I need to work out what I paid for each group of the Drip shares and then work out the average price. I'm sure even my "maths avoidance" brain can work out the average once I have worked out what I paid for each share, but I can't work out which figures I should be using. 

On the back of my latest DRIP share certificate from BP, which gave me 5 new shares, I have the following information:-

Share price - £4.1005
Purchase value - £20.50
Link commission - £1.25
Stamp duty - £0.10
Aggregate purchase charges - £1.35
Net consideration - £21.85
Residue carried forward to the next dividend - £3.65.

By the way, the value of each share as at yesterday was £4.51 and it appears that the initial price of £5.93 has rarely been exceeded, so I suspect I'm going to be making a loss rather than a gain. Do I have to show my workings out on my tax return? 

DRS1

There is a format which HMRC use for calculating gains.  I have taken 2 screenshots of a calculation I did when I sold my BP shares in 2020 (at the bottom of the market).  Like you I had done some dividend reinvestment so there were a whole load of single share acquisitions which I have left off but there should be enough for you to see how I did it. 

Essentially it was a matter of adding up the number of shares acquired and the acquisition cost (including the stamp duty and commission where relevant - it wasn't for my DRIP (they are called Incidental costs of acquisition in the form)).  So you will see in my second screenshot a total acquisition cost and that is deducted from the total sale proceeds (net of commission) to give the gain (or loss). 

In an ideal world you only have one acquisition and one disposal so the form is a lot shorter. 

You only really have to fiddle with s104 pools if you aren't selling all the shares at once - in that case you do the same sums but then if you only sell half the shares you halve the base cost to work out the gain. 

Oh and you will see a line about a subdivision.  You need to watch out for things like that which may change the number of shares you hold and can in some cases affect your base cost

Kismet_Hardy

Thank you DRS1 - it is very kind of you to put yourself out like this. When I read through what you have posted and looked again at what I had posted, the penny dropped. It sometimes takes a while when maths are involved! Thanks again.

DRS1

Yes well doing that calculation taught me to steer clear of DRIPs in future.

Kismet_Hardy

Yes - wish I'd known about this earlier!