CGT and the budget

Dilbert_Investor

Given speculation about the CGT rate increasing to match income tax rates, I’m thinking about what to do with my investments.

I don’t want to be out of the market, but is selling accumulation units and buying income units in the same fund caught by the 30 day B&B rule?

Also, would it be better to realise the gain but save the losses until the rate changes.

Is there anything else I should be considering?

Thanks,

InvesterJones

Never act on speculation. Every year there is speculation and every year people lose out because they act on it.

But yes, switching to income units would not generate a CG and is covered under B&B 30 day.

Dead_keen

is selling accumulation units and buying income units in the same fund caught by the 30 day B&B rule?

Very unlikely to be within the same day or the 30 day B&B rule, so you would have a CGT disposal in the same way as if you had sold Tesco shares and bought Sainsbury ones.

If the unit manager does the conversion from one class to another then it normally is a "nothing" for CGT as it will fall within the share reorganisation rules. But you'd need to know what the manager actually did to be sure.

If you sell one type of unit it and buy another type of unit in the same fund then they are treated as being assets of a two different classes and so the same day matching / 30 day matching rules do not apply. You get a disposal of one type that is fully taxable (normal CGT rules) and an acquisition of another type.

HMRC explains its view here.

Dead_keen

There is a lot of speculation and much of it is because someone has an agenda.

Dilbert_Investor

Thanks. It would be a sale of acc units and a separate purchase of income, so two contract notes. CGT paid on the gain on the sale before reinvesting.

EthicsGradient

This is third hand, of course, but this is a report of a conversation with a tax inspector:

I was in a similar position to you, and wanted to switch my OEIC accumulation units into the same OEIC's income units. My GIA is with iWeb and they do not offer an explicit switch option so I implemented the change by selling my acc units and rebuying the inc units. At the time, I thought this was what is meant by a 'switch'.

I called HMRC recently (early November) to be crystal clear on how I should treat this as I wasn't 100% sure. I was eventually passed on to a technical inspector who called me back later that day to tell me that it is considered a disposal and I need to pay CGT on the gain. I think the problem comes from what platforms call a 'switch' and what HMRC calls a 'switch'. I asked iWeb and they told me they don't deal with tax.

I also asked about bed and breakfasting rules as they almost identical products and they don't apply due to CG57709. Apologies, I meant to put that they don't apply and accidentally put do.

Turning accumulation funds into income funds : r/UKPersonalFinance

zagfles

Never act on speculation. Every year there is speculation and every year people lose out because they act on it.

Everyone acts on speculation. You can't invest in equities etc without speculating, even if it's that "my balanced equity fund will go up over the next 20 years". Speculating about tax changes is no different.

The questions to consider when taking an action based on speculation are:

• What would the gain be if the speculation came true (eg CGT raised at the budget)
• What would the loss be if it didn't (eg transaction charges, poss loss of use of CGT allowance in future)
• What is the likelihood of the speculation being correct
• What if something unexpected occured and the likelihood of it (eg CGT being reduced!)

If the loss from acting on speculation which didn't materialise is a tenth of gain if it did, then unless you think the chances of it happening are under 1 in 10 it's probably worth doing. Unless you think there's a possibility of a curve ball like CGT being reduced!

masonic

https://forums.moneysavingexpert.com/discussion/comment/82144071#Comment_82144071

This would be a disposal (sale of one financial instrument, then the separate purchase of another using the realised cash). Where it isn't a disposal is when you exchange one for the other directly (such as a conversion performed by the fund house).

PixelPound

Anyone with the memory of last year's budget where pensioners took out funds in fear of rumoured leaks that never happened, should take heed.

If you sold now because of this rumour and the change never happened. Would you regret it?

DRS1

When the rates were changed two years ago there was a split year (and some complicated adjustment for pre and post change disposals which I don't pretend to understand). You may want to dig into that adjustment to see if it makes sense to realise the losses after the change and the gains before. Chances are they will do the same thing this time (if they do anything at all).

EthicsGradient

In 24-25, my reading of the way they worded the "adjustment" for the intra-year increase was that the allowance and any losses, whenever in the year they were incurred, could be set first against gains after the increase in rate. So I did that (including losses that were before the rate change rate), noted that this meant I did not have any adjustment necessary, and put "0" in the adjustment box. Which was accepted, though of course they may have just taken my word for it. I think I had a discussion, here or on another site, and we had concluded this was fine to do.