CGT question

talexuser

How does CGT work if you have invested in a series of funds through many years? I assume you report the last fund purchase as the applicable gain for that tax year if all the different intermediate funds made gains over the years that were never crystalised?

If that is the case can you not avoid some CGT by buying a low yield fund for a time?

Say I bought Fundsmith near the beginning and it has gone up 70% and if I sold just 10% of the Fundsmith holding now it would immediately breach the 3k gain to incur tax.

I sell all of the Fundsmith and buy Capital Gearing or Caledonia just till the next tax year. It goes up 2 or 3% for the period of holding before sale. I can sell much more £ value before breaching the 3k gain limit for that purchase?

I know there's the 30 day rule for sales and repurchases, but does this make sense for an entirely  different fund purchase or is there some time limit for holding?

masonic

I don't understand what you are trying to achieve. The disposal of your Fundsmith units will incur tax. The only way to reduce that is to crystallise a loss within the same tax year (or use one you've carried forward from an earlier tax year). It is not moneysaving to deliberately lose money in order to pay less tax, so any loss would hopefully be unintentional.

If you buy Capital Gearing for example, then that's an entirely new holding. Investing for just a few months could see you realise a gain or a loss and is not a good idea generally. If you need the money within a few months, then you'd be better off using an easy access savings account to keep it until it is needed.

There is no time limit for holding an investment. You can buy and sell on the same day if you wish, but it is not generally sensible to do so. Bed & breakfast matching rules only apply when you sell and then reacquire the same financial instrument within 30 days.

poblomov

You match sales to purchases of units in the same fund.

Maybe I am misunderstanding, but you seem to be asking can you match sales of Fundsmith units to a purchase within the next 30 days of units in an entirely different fund.

If that's what you are asking, the answer is no.

Share/unit matching rules are for all shares/units of the same class in the same company/fund held in the same capacity

talexuser

It looks like there's no easy way out, without holding purely low yielding funds not to incur CTG, which is self defeating in the long run.

The idea is to sell 20k for the years ISA with minimum CTG.

My GIA spreadsheet has a column calculating the sale required for a gain of 3k. Long running funds can only achieve a sale of 5 or 6k before a 3k gain, whereas the self preservation part  of low yielding stuff can get to 20k or more sale for a gain of 3k.

So I suppose the only way is to sell self preservation, and then use dividends to replace those sales to keep the balance required? Or hope for a crash with some losses

jimjames

talexuser said:

It looks like there's no easy way out, without holding purely low yielding funds not to incur CTG, which is self defeating in the long run.

Low yield is irrelevant for CGT, it's the gain that matters not what income it has generated which may be liable for income tax

ColdIron

Yield has nothing to do with capital gains. Amazon has never paid a dividend in its life but has provided significant capital gains challenges

eskbanker

jimjames said:

talexuser said:

It looks like there's no easy way out, without holding purely low yielding funds not to incur CTG, which is self defeating in the long run.

Low yield is irrelevant for CGT, it's the gain that matters not what income it has generated which may be liable for income tax

I could be wrong but think that OP's reference to "self preservation part  of low yielding stuff" really means low-risk low-return products aimed at wealth preservation, rather than literally those with a low yield in the conventional sense?

talexuser

Yes, I used the wrong word to describe low growth capital preservation funds like Personal Assets or Caledonia, yield for total growth. All my ISA funds are acc, but GIA are inc just for easy tax calculations, but all inc gets reinvested. The highest yielding funds are in ISA to minimise dividend tax.