The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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"ICL that is bed and breakfast deals ... I think you will find that bed and ISA deals are different .... but to get qualified advice .... go to a registered tax adviser ... tax issues are a minefield"
With a steady as she goes share, you just have to sell them over a number of years, using up the annual CGT allowance as you go.
With SAR, we are expecting a takeover, which abruptly crystalises the gain.
If you panic, you can very well do some rapid buying and selling.
If you don't understand the 30 Day Rule, you can easily get into a tangle.
I forgot to mention that under the bed and ISA rules, the 30 day rule means that the sale and repurchase of shares during this period count as the same asset and therefore do not qualify for CGT ... but note ... I am not qualified to advise ... go to a professional if you need tax advice.
ICL that is bed and breakfast deals ... I think you will find that bed and ISA deals are different .... but to get qualified advice .... go to a registered tax adviser ... tax issues are a minefield
The 30-Day Rule of 1998
"A bed and breakfast strategy allows investors to minimize the amount of capital gains taxes they must pay. The 30-Day Rule of 1998 banned the practice of "bed and breakfasting," forcing investors to wait 30 days before being allowed to repurchase the security they had just sold."
Before 1998, the CGT annual exempt allowance was around £6,000.
So, if you had say Lloyds shares outside an ISA/TESSA/PEP, which grew in share price, you would lock in the gain by selling on Monday, then buying back on Tuesday, aka bed and breakfast.
E.g.
You bought 10,000 shares at £2 in July 1996 for £20,000
You sell 10,000 shares on 1st July 1997 at £2.60, for £26,000.
You have crystalised £6,000 in capital gains in the tax year 1997/98,
but it is within the exempt allowance, so you pay NO TAX.
You buy back 10,000 shares next day, 2nd July, for around £2.60, so it's £26,000, plus the 0.5% stamp duty £130.
With a little dealing charge, the base for CGT purposes is now £26,150 for the 10,000 shares.
You repeat the operation in July 1998, selling at £32,000, the gain is
£5, 850 = £32,000 - £26,150
Yet again, the gain is less than the exempt amount £6,000, so you pay no tax.
What the heck is going on here, all these peasants getting away with NOT paying CGT!!!
so the Inland Revenue clamped down on it, with the 30 Day Rule.
So, if you THINK you can sell SAR on 3rd August (2nd is Bank Holiday),
and then buy them back on 4th August, and make use of the £12,3000 allowance for 2021/22,
you will have a nasty surprise.
Let us say you sell on 3rd August for 8.8p,
and buy back on 4th August for 9.1p, the 30 Day rule will force you to match the two trades,
so you bought at 9.1p , and sold at 8.8p, incurring a loss of 0.3p . Your original base price has not changed one iota.
The matching will not happen if you buy back 31 days or more later.
So, you sell on 3rd August for 8.8p, then buy back on 1st September for 40p!!!!
It is possible to do it, but you need to have lots of cash.
So, you sell say, 500,000 shares of SAR in your account, and simultaneously buy 500,000 shares in you wife's ISA and dealing accounts with cash you already have. Four days later, your sell trade settles, and you can pay her back.
Not ideal, really, because you lose on the offer/bid spread.
Investing 101
Max out your ISA allowance !!! - whether that be SAR or any investments in general it really is a no-brainer !!!
Do not forget you can transfer shares to a spouse and they will inherit the base cost you paid for your shares. So effectively you transfer part of your gains to your spouse. Then both you and your spouse will be able to use the 12,300 annual CGT tax free allowance each against any gains on sales. Also remember there are 2 rates of CGT 10% and 20%. If you are a basic rate tax payer then any taxable gains (after taking off your CGT allowance of 12,300) you make that take your combined income and capital gains up to 50,000 are only taxed at 10%. Any gains that take you above 50,000 are taxed at 20%
AND you will be liable for any CGT on any gains made in your trading account above the threshold thus far ... If it's substantial bad luck and remember you can only move £20k to an ISA this tax year. If you have a partner consider opening an ISA for them too. I wouldn't leave it too late if I were you.
Your question doesn’t make 100% sense. Is your substantial holding still in your trading account? But you have an ISA you could use?
If so, request a bed & ISA transfer AS SOON AS BL00DY POSSIBLE
With a substantial amount of profit and even though I`ve got a stock ISA, IF leaving in my trading account would it stall HMRC until I transfer into my ISA account?