Selling shares held for 30+ years

brewerdave

I gifted some shares to my wife back in the mid 90s, resulting from my company's profit sharing scheme. We are now thinking of selling some, but finding it very difficult to calculate potential Capital Gains tax liabilities, for many different reasons! Demergers, name changes, share consolidations etc etc and we don't even know WHEN I gifted them!

But one thing I can't really get my head around is indexation - I know Brown abolished indexation in 2008? and then taper relief was ended later - but does that mean none of the gains from pre 2008 can be indexed , even though inflation was rampant?

poseidon1

https://forums.moneysavingexpert.com/discussion/6684069/selling-shares-held-for-30-years

The abolition of indexation in 2008, means its not available at all for any disposals you are now considering. The short Q & A below explains -

https://www.boringmoney.co.uk/ask/understanding-capital-gains-tax-how-inflation-impacts-your-asset-sales/

brewerdave

Thanks for the info. To me ,seems dreadfully unfair - but what else can one expect ?

Looks like her shares ,now "worth" ~ £53k , were initially valued at ~ £8-9k, so we would have to pay many £thousands to the Exchequer if we sold. Will have to sell a few each year ,over the next few tax years to avoid CGT .

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82144793#Comment_82144793

Bear in mind nothing prevents her gifting half back to you for you to use your CGT exemption (if unused elsewhere).

One observation worth making, I would certainly not bank on the £3,000 annual CGT exemption remaining unchanged in the years ahead.

Only 4 years ago the exemption stood at £12,300 and it has been whittled away by successive Tory and Labour administrations to the tiny amount now available.

CGT seems to be the low hanging fruit for the exchequer when extra taxes need to be found.

There is a saying not to let the 'tax tail wag the investment dog'.

I am sure you are already aware that holding on to single company shares over the long term comes with higher risk of investment losses further down the line compared to investing in collective unit trusts and etfs.

Sacrificing a bit of tax each year to get some profits from those shares into more diversified holdings should always be considered part of your long term investment journey.

Failing to make any disposals in the past when the exemption were considerably higher, suggests there was no annual review system in place to consider this matter for your wife's shareholdings.

dunstonh

But one thing I can't really get my head around is indexation - I know Brown abolished indexation in 2008? and then taper relief was ended later - but does that mean none of the gains from pre 2008 can be indexed , even though inflation was rampant?

What followed was a significant increase in the CGT allowance. So that it more than made up for it.

Unfortunately, the last two governments have decided that Wealth should be taxed more and removed those significant increases. It will probably get worse before it gets better. These things often cycle over the decades.

pafpcg

"Will have to sell a few each year over the next few tax years to avoid CGT"

With a £40k gain, it'll take more than "a few" years! Gift half back so you can use both your CGT allowances.

Depending on price-growth of the shares, it might take even longer - my partner and I purchased £15k of Scottish Mortgage shares 14 years ago; now that we want income rather than growth, we've sold a slice of the holding to just match the joint £6k CGT allowance for several years now, but the remaining shares just keep on growing faster than the annual allowance! At this rate, we'll never get rid of them…

Farway

One more thing to bear in mind, rumour & flag flying maybe, but having same rate for CGT as Income tax would also add to your Tax bill.

Perhaps time to do some sums and bite the bullet early?

leosayer

It is difficult when so much time has passed but it's unavoidable because HMRC expect an accurate calculation.

The company share registrar and/or platform should be able to provide a complete transaction history including transfers. This will help however you may need to do more digging when it comes the corporate actions like demergers.

brewerdave

https://forums.moneysavingexpert.com/discussion/comment/82144878#Comment_82144878

Regrettably you are quite correct that I neglected the capital gains that these remaining shares were making, that resulted from my career with Bass last century! - we were only keeping these Intercontinental Hotel Group shares for the dividend (at the start my wife was a non taxpayer) and I didn't really twig how much capital growth there has been in them over the last few years. Appears to be ~ 400% in the last 10 years.

Fortunately most of the former Bass derived shares are sheltered within ISAs.

Looking at my records we both sold a lot back in 2006 to pay off our mortgage , in fact the majority of our holdings in Intercontinental Hotels Group that weren't within the ISAs - the share price then was then about 8% of what it now is ,unfortunately!

In view of some of the other advice, I may well decide to "bite the bullet" and get shot of most of these shares - God alone knows how I'll calculate the taxable gain tho' ,as I have no record of exactly when I gifted the shares to my wife, what the then price was - and there have been innumerable consolidations ,share splits and a demerger in the last 30+ years.

spider42

https://forums.moneysavingexpert.com/discussion/comment/82143960#Comment_82143960

That isn't quite correct. The OP mentions a transfer to his wife in the mid 90s. The deemed cost of her shares is the original cost of the shares + indexation. The indexation is effectively 'banked' at this stage (which was long before IA was scrapped or even before it was frozen). From her perspective, she isn't claiming 'indexation' when she sells the shares, but the indexation is effectively baked in to the deemed cost of her shares. So her shares are effectively indexed from the date of acquisition by him, to the date the shares were transferred to her.

If the shares were transferred to her almost immediately, then it isn't going to make much difference. But if he had held the shares for a few years before transferring them to her, then this could potentially make a significant difference to her CGT base cost.

spider42

https://forums.moneysavingexpert.com/discussion/comment/82144904#Comment_82144904

There wasn't a significant increase in the annual allowance. It was £9,200 in 2007/08, and £9,600 in 2008/09. Five years later it had still only increased to £10,600.

The 'compensation' for removal of indexation (and taper relief) came in the form of reduced rates of CGT (especially for higher rate taxpayers). In 2007/08, CGT was taxed at the taxpayer's marginal rates of Income Tax (10%/20%/40% at that time). In 2008/09, this was replaced with a flat rate of 18%, irrespective of which tax band you were in. An upper 28% band for higher/additional rate taxpayers was later introduced by the coalition Government in 2010.