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If you have tax free ISA gains x 2 and gains covered by your annual CGT allowance then 10% on a portion of your non ISA gains (or 20% if you are a higher rate taxpayer) gives a fairly low effective tax rate on trading. If you are making profit of £200k in total (half each ISA / non-ISA x 2 spouses, then you may have tax of 8k-15k (ie 4-8% tax)
Compare that to your income tax and NI insurance payroll of maybe 32-45% and it seems highly efficient and a low overall rate and sleeping in peace at night.
It can get a bit messy if you have multiple accounts and hundreds of trades but if your broker allows downloads to an excel spreadsheet then it is rather striaghforward once you get it clear in your mind.
My main bane is stamp duty as I see it as lost profits. Have considered CFDs but do not like the overnight charges if you need to hold until a position comes good. Any heads up welcomed re stamp duty.
Everything where possible in an ISA. However then the Revenue have you on IHT if you build up a sizeable portfolio over the years. Just remember to enjoy your gains. Let rip on a park bench with a takeaway coffee or jump a park fence like Han**** :). Go mad.
A useful way I have found is to realise your (non-ISA) losers that you feel will turn good. eg this year GSK (insert any stock) for example on 5th April. Rebuy on 6th into an ISA or prior to year end if your have freed the necessary cash within the ISA £20k allowance to ensure the position moves over. The paper loss reduces overall gains and once in an ISA the 30 rule does not apply. The match is broken. The anticipated recovery and dividends are tax free and if done right you can transfer with minimum differences.
Hi Mick
Thanks for the info, I did follow the link to the HMRC website & this didn’t make much more sense to me, think I’ll bat this one back to the accountant
Cheers
Windows345,
It's all described in the HMRC document that MaryBR190 provided a link to at 11:25 today further down this "thread". Note - it's 30 days, not 31 days! Presumably you each have your own CGT allowance.
Rgds, Mike.
Is it just me that finds the issue re CGT & multiple share purchases confusing / complicated / bewildering ??
i,m in the same position this year, i have 4 accounts, 2 stock & shares ISA,s 1 me, 1 her indoors, no tax to worry about there.
2 more trading accounts 1 me, 1 her indoors with profits mostly from BP. above the CGT threshold for this year, i want to bed & ISA as much as possible end of this tax year to use our allowances, but whats this 31 day rule all about ??
Thanks in advance
Timydogy,
On my reading of the "30-day rule", on the transaction on 5 Mar 2021 in your example you have not made a gain in tax year 2020/2021, but a very large loss. The 10,000 shares you sold on 5 March , for proceeds of £19,990, have to be matched against the 10,000 you bought on 21 March, at a total cost of £30,160. So you made a loss of £10,170. If you've already exceeded your CGT allowance for this tax year, unless you've exceeded it by more than £10,170, this loss will eliminate any CGT liability for the year.
If all your other gains for this year totalled less than £10,170 (which presumably *won't* be the case because you say you've already used up your CGT allowance), then overall you'd still have an overall net capital loss for the year which you can claim, and also carry forward for a number of years.
10,000 shares at the *original* cost (£10,060) go forwards as the Section 104 holding, so if/when you sell any shares of X in the future, these are what you'd have to match that sale to.
Regards,
Mike.
Not advice. Here goes. My understanding is as follows.
With your initial query, my assumption was that you were reversing the "sold in error" quantity (in full) and buying back within 30 days.
This falls under the matching rules and would create a loss or gain (on that matched transaction) which is taxable in the current year at your CGT rate 10% or 20% (rate depending on your other income).
The new example, Comp X, differs from your original query. In this case
Share disposals are matched with acquisitions in the following order
(a) same day
(b) within 30 days
(c) and finally the share pool.
The 21st of March is matched against the 5th March sale. In your example, because or the large rise in price you actual have a loss for CGT purposes of £10,170 (2020/21).
The 50% price rise in a short period would be unusual, although possible I suppose.
Going forward you have 10000 shares will go into the S104 pool at a base cost of £10,060.
The "matching" rule exists to stop shares being sold to crystallise a capital gain or loss, solely to use up the tax free exemption.
I’ve used up my CGT allowance.
Example, I cannot quite understand the wording in the other example.
1st March 2021 Buy 10,000 shares in X at £1 a share plus costs £50 tax and £10 transaction cost.
Total Buying costs £10,060
5th March 2021 Sell 10,000 shares in X at £2 a share minus £10 transaction cost.
Total Selling cost £19,990
Profit - £19,990 minus buying/selling costs (£70) and initial capital (£10,000)
Profit = £9920
21st March 2021 Buy 10,000 shares in X at £3 a share plus costs £150 tax and £10 transaction cost.
Total Buying costs £30,160
Shares bought on the 21st March 2021 are kept for the remainder of the tax year.
On the 6th April 2021, you submit your tax return, do you realise that profit of £9920 on your tax return from the sale on the 5th March 2021 ?
Or because you still own the shares, bought back the same shares, not realise the profit until you actually sell on the shares bought on the 21st March 2021.
You do have a CG tax free allowance £12,300 for 2020/21.
Within 30 days, they are matched and do not form part of your S104 holding.
Any gain / loss on the buyback will be insignificant unless there is a spike.
Example
Mr Schneider owned 10,000 shares in Mesopotamia plc.
500 were purchased on 11 September 2019. The remaining 9,500 are held in the Section 104 holding. Mr Schneider sells 4,000 shares on 30 August 2019. The disposals are identified as:
500 against the shares purchased on 11 September 2019 under the ‘bed and breakfasting’ rule
3,500 against the shares in the Section 104 holding
Suppose Mr Schneider received £6,000 for the 4,000 shares he sold and paid £850 for the 500 he had bought a few days later. Because he bought additional shares within 30 days of making the disposal, 500 of the shares sold are not matched with shares in the holding. They are identified with the 500 shares bought on 11 September 2019.
The gain or loss on those shares is calculated as follows:
Amount
Disposal proceeds (apportioned 500 ÷ 4,000 × £6,000) £750
Allowable cost £850
Loss £100
Buying back sold shares?
The 31 day rule.
This might help others out?
Sorry for the off topic, but I f**ked up.
I messed up yesterday, Friday; instead of buying a chunk BP of shares, I sold a chunk. If they open higher on Monday, well I want to buy them back, albeit at a higher price than I sold for.
Now I owe capital gains tax for the shares I mistakenly sold on Friday. Made a profit.
If I buy back the same amount/number of shares, in BP; albeit for a higher cost than what I have sold the shares for yesterday. All this within the same 31 days.
Is it correct, the capital gains tax I owed on selling the chunk of shares by mistake, yesterday; will not need to be reported in my self assessment tax report as I bought back the shares at a higher cost on Monday.
I will only be required to report any profit so capital gains tax owed on selling the shares when I eventually sell the shares for good? Hopefully at a profit?
Cheers