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Yet another newbee here, so please be gentle….
I have a large amount of Tesco shares outside of any tax free wrapper and will be subject to a 32.5% tax on the dividend ( I have already made use of this years ISA allowance as well as changing my SIPP to take shares rather than cash ).
As it stands at the moment, I have two choices for the remaining shares which are outside of tax free wrappers…
1. Keep them, declare the tax on the dividend ( which will help pay off the national debt ) and hope that the SP of the lower number of shares ( 15/19 ) climbs ( given the company is stronger, pension deficit reduced etc )
or
2. Sell them prior to the cutoff point, avoid the tax on the dividend and look for a buy back position if the shares drop post consolidation ( to place in next years ISA ). For this option, CGT shouldn't be an issue as the average price of my holdings is sadly higher than the current price.
Part of me suggests I should hedge my bets ( I have already sold some this week ) whereas another part of me suggests I should the sell the remaining ones over a number of days ( to average out the price ).
Would appreciate any thoughts you have, thanks in advance.
same boat as you, and ive been contemplating this very question in my mind for a while now, not staright forward is it? not sure my dividend tax will be 32.5% tho ....
Not sure if relevant to this situation but remember you’re allowed I think £12300 profit before paying any cgt.
Dividend is subject to income tax .
dont forget 2k dividend allowance too before any tax is calculated
Tax free in an ISA wrapper...
Thanks for your feedback,,, due to the volume of shares, and the half year dividend, I have used up the £2k allowance and therefore the remaining amount is taxable at the tax rate that applies to you. For me, many of my shares came from previous profit sharing, SAYE etc for which the SP was higher, so the average SP for my holdings is higher than the current SP. As correctly pointed out by Pandy2, you do have a CGT which will help many people.
So, the question for many is do we expect the SP to stay static up until the 12th or to rise... this is what I am struggling to get my little brain to come to a conclusion on ( which will then help determine which of my choices I need to make ).
Is it in the interests of the institutions to buy more shares between now and the 12th?
Another first time poster here...really useful information and viewpoints over the last few weeks...and I'm happy with where I want to go with TSCO stock, however I notice on HL and WWW.dividenddata sites today the ex div date is stated as 15th Feb...? I had been working on the basis of ex div on the 11th Feb....I've clearly missed something somewhere if this is the case...?
CGT only applies to the shares you SELL outside of an ISA and after you have calculated any other dispoals that tax year ie possible losses and more gains and then you use your Cap gains Allowance £12,300 and then you can use losses from previous years too,( needs looking into) but after all those measures the rate of tax is 10%for basic rate tax payers and 20% for higher. this is as understand it of course.
dividend tax is 7.5% on income over £12.500 +2,000 dividend allwance , them jumps to 32.5% for higher rate.
Like others, it's the tax situation I'm not happy with in my trading account but for my ISA and SIPP holdings I'll be re-investing the divs.
I recently increased my holdings into my ISA and SIPP which are long term, and top sliced my trading account holdings today and invested elsewhere, for a better overall return I hope elsewhere, even if the SP runs up more to ex-div, IMO 260.
Eye_Wink - some additional thoughts for you, as I am in the same position although a lower tax band one.
1. Speculation is the CGT tax free amount will be reduced significantly from the £12,300 currently enjoyed (rumour £2,000). CGT rates of Tax may also be aligned with income tax for the next tax year, thus 20/40/45% depending on your marginal rate vs the current 10/20% for basic/High rate payers.
If you sold now and made a CGT loss (you said your underwater on shares presently), I'm reasonably certain that loss can be carried forward into the next tax years (not sure how many years you can do so but believe it's multi year). The benefit being it should mitigate any future CGT gains from profitable sales of other shares/assets (property etc). Of course, this only applies if you become profitable on your folio of shares/assets and then you will be offsetting profits against a potential 40% future tax rate. It might be useful for example if you were to sell TSCO now and then buy back to avoid the dividend tax/share consolidation and to speculate on future gains in the shares.
2. If you take the dividend, your tax rates are either 7.5/32.5/38.1% once you exceed the £2K allowance. Again, it's highly likely these rates will be increased to align with income tax so you may be paying 40% in future on dividends rather than your 32.5% from this tax year.
3. Can you put any more contribution into your pension, eg if you moved the TSCO shares into your SIPP (or were to set one up)I think you avoid all tax until income is taken. You will of course pay tax on the income but by then you may be earning less and currently there is the 25% tax free lump sum which may also be under threat though?
So, it's a minefield and the tax situation is just speculation until the budget. Personally, as I can't move any more into ISA/SIPP this year, I'm going to take the 7.5% dividend tax rather than sell my TSCO which are currently profitable and would reduce my rather sad CGT loss position carried forwards from previous years.
Dunno if any of that helps/makes sense?
Hi Reader61, thanks for raising some excellent points....I am sure that these comments will be very useful to many others out there in the same predicament as us. I hadnt even thought about potential budget changes, but what you say makes perfect sense, the government has to claw back the money somehow. As you say it is a minefield and I feel that whatever I do will be wrong when I look at it with hindsight!!
80% reduction of CGT. Can you post a link to that rumour? If that was true then it would take billions out of the market and the economy. The very last thing the Chancellor would want to do.
Of course tax rises are inevitable but not so draconian and at once. They will be phased in in-line with any recovery.
Sure :-
https://www.which.co.uk/news/2020/11/four-major-capital-gains-tax-changes-the-chancellor-is-considering/
I suspect now that more and more of us are trading shares because of awful returns on savings, then this seems entirely logical. It's nasty because we have already paid tax on the money when we earnt it and matters could be compounded by also cutting the ISA/Pension allowances too. Of course, if you have a final salary pension - no worries at all.
Furthermore, IF it does happen, it won't go away - a bit like vehicle tax that rises every year and when they lose out on that, they raise the idea of rod pricing.
Hopefully and I really do hope that wealth taxes are not introduced - that would take a fortune from us indeed.
Leas
Someone has to pay for the pandemic. I would prefer those more wealthy than the poorer suffering 50 years of austerity (the timescale that the Westminster government has said it would take). A combination of high inflation, higher taxes on earned and unearned income and much shorter term austerity will avoid / ameliorate the Great Reset.
Rosewell
I have never denied or stated that the money doesn’t have to be paid back. All I’m saying is that it will not be overnight and all at once. Not sure if the point you’re trying to make.
Hi Leas,
Don't worry about it. This was posted on the wrong board, I thought we were in the other place where other things are discussed. I will leave this board for TSCO.
Rosewall
No worries the other bb is my alter ego. Take any of my comments on there with a large pinch of salt. It’s my guilty pleasure until travel restrictions are lifted and I can get out of the UK. ;)
I see Schroders are reducing significantly in MRW. However, unless I have missed something I have not seen any RNS announcements for TSCO. All the significant shareholders including Black Rock, Norges and Schroders have maintained their pre Asia holdings.
I know in the short term the SD is an unnecessary complication but why has there not been any significant reduction in insti holdings.