Interaction of property sale gains with gains and losses from share sales when calculating CGT

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tg99
tg99 Posts: 1,199 Forumite
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Say in 18/19 you have income of £20k, gain of £100k from property, £30k share gains and £10k share losses. Am I right in that you can order these gains and losses such that the property gains can fill first the annual exempt amount and the share losses can be offset against the property gains rather than having to be netted off the share gains, as follows:

Property cgt at basic rate = £46,350 - £20k * 18% = £4,743
Property cgt at higher rate = £100k - (£46,350 - £20k) - £11,700 - £10k * 28% = £14,546
Share gains cgt at higher rate = £30k * 20% = £6k
TOTAL DUE = £25,289

Or do you have to for example net the share losses of the share gains first such that the calc would be:

Property cgt at basic rate = £46,350 - £20k * 18% = £4,743
Property cgt at higher rate = £100k - (£46,350 - £20k) - £11,700 * 28% = £17,346
Share gains cgt at higher rate = £20k * 20% = £4K
TOTAL DUE = £26,089

Other than crystallising any share losses before tax year end, maximising pension contributions to give more basic rate band room and use of tax efficient vehicles like EIS, are there any other ways to minimise cgt tax in the above scenario?

(In theory, assuming my first calc is correct above, you could arbitrage the difference between share and property cgt rates to lock in a certain 4% of any share gains and losses by buying and later selling a share and hedging it with a corresponding short spread bet with a hedge ratio of 76%. But in practice this is unlikely to be beneficial since even a 10% movement would only gain you 0.4% which would likely be more than offset by transaction costs.)

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  • [Deleted User]
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    Good question! However, I don't think so. The CGT form is below. The fact that it asks you to complete gains and losses within each category would tend to suggest that share losses are set against share gains and property losses against property gains. This form has changed significantly since prior to the different rates for share and property gains which adds further weight to my answer. No doubt some of the CGT experts will be along later as I would also like to know definitively.

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690350/sa108-2018.pdf
  • tg99
    tg99 Posts: 1,199 Forumite
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    edited 22 January at 3:51PM
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    [quote=[Deleted User];74935606]Good question! However, I don't think so. The CGT form is below. The fact that it asks you to complete gains and losses within each category would tend to suggest that share losses are set against share gains and property losses against property gains. This form has changed significantly since prior to the different rates for share and property gains which adds further weight to my answer. No doubt some of the CGT experts will be along later as I would also like to know definitively.

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690350/sa108-2018.pdf[/QUOTE]

    Thanks and yes that’s what I originally thought. However, I have now just tried this out on my 17-18 online tax return as have not yet submitted - if method 1 above is correct then the figure due should be £25,536 and under 2 should be £26,336 (ie using 17-18 rates of £11,300 for annual capital gains allowance and £45k for top of basic rate band).

    The online calculation indeed produces the figure of £25,536 and on the breakdown it shows £30k share gains being charged at 20% and only £78,700 property gains being charged at 18/28% thus it has allocated the £10k share loss against the property gains. (When filling out the capital gains section I did split it out as £30k share gains and £10k losses too.)

    So looks like method 1 above is correct then.
  • Sibbers123
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    You can offset losses whichever way you wish, like you can with the annual exemption. Therefore, the share loss can be offset against the property gains (and will automatically if using HMRC software as it is the most beneficial way).
  • tebthereb
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    As to mitigating CGT it’s hard to say on the facts given. Presumably:

    - shares and property are actually subject to CGT rather than income tax

    - we are talking residential property and PPR is not available

    - beneficial ownership doesn’t allow you to split the gains and double up on the CGT annual exemption.

    - gains have happened and none of it can be deferred into another tax year.

    - presumably no available losses brought forward.

    Personally on these sort of figures I would be using a tax advisor.
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