Really dumb cgt / bed and breakfasting question - budget

Really dumb cgt / bed and breakfasting question - budget

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Discussion

stuthemongoose

Original Poster:

2,376 posts

223 months

Saturday
quotequote all
I hold some ETFs that, fortunately, have made some returns and are in profit at the moment. CGT will be liable on sale as not in ISA etc…

As I understand it, if I sell shares (in ETFs?) and buy again in 30 days, the gain/loss is only payable/ofsettable on the sell-buy delta under bed and breakfasting rules.

With musing in budget about CGT increase …..

What would be the downside to:

1. sell my ETFs on Oct 29th and see what budget says.

2a. If CGT level unchanged - buy back Nov 1st. I’ll have a small cgt charge or loss to file (assuming markets don’t move massively over 2 days).

2b. If CGT level immediately spikes to 30-40%, leave holding in cash for 30 days to fully trigger the CGT at ”old” rate on full holding. Reinvest after 30 days. I cannot see a situation where the markets will increase by the 10+% that CGT liability could go up in that short period. I’d rather bank what I have at the current rate at zero risk than pray for a big market jump to yield same return for 30days.


Have I totally misunderstood B&B rules? Am I missing something? This Feels like a relatively “cheap” option I have to sell/buy around the budget to give me a way to crystallise current gains at current rate…. But I’m not seeing this in the press/recommended anywhere. Am I missing something stupid here biggrin

Thanks all!


deggles

640 posts

208 months

Saturday
quotequote all
Potentially a sensible plan if you have gains to crystallise. If you don’t want to be out of the market for 30 days, you could just buy a similar but different ETF immediately after.

stuthemongoose

Original Poster:

2,376 posts

223 months

Saturday
quotequote all
Thanks, deggles.

The only other downside I can see of crystallising is lost compounding opportunity on 20% of the unrealised gain (the tax I’d have to take out). As a %age of my portfolio it’s not massive so crystallising it may make sense.

I’d not touch it if it wasn’t for CGT potentially increasing. This I suppose in some of the strategy of leaving it all
So uncertain by the gvmt - force the tax receipts. They may well leave cgt untouched and they’ll have gotten tax of me….

eyeslikealemur

27 posts

1 month

Saturday
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Think they said no CGT increase but not been asked or said anything about the £3,000 annual allowance.

That's very likely to go completely I reckon.

Look we're slapping all them rich barstewards in the face everyone.

Whoopdydoo.

Well done.

Nice glasses Sir Sausage.

Is that a new suit?

Panamax

4,843 posts

40 months

Saturday
quotequote all
As regards the B&B rules I wouldn't sell and then buy the same thing back again. There's usually a very similar investment available that you can just switch straight into, avoiding the whole issue. And, of course, you can always reverse the switch a month later if you feel so inclined.

Nothing wrong IMO with paying a bit CGT from time to time. It clears the decks in terms of future tax changes and also stops you getting into the position of "I ought to sell this investment but can't because of the CGT implications...." Best not to let the tax tail wag the investment dog.

Over the years my "average" CGT rate is around 10%. It's harder to keep that suppressed these days because the annual allowance has all but disappeared, leaving everyone in the 10%-20% range.

MadCaptainJack

894 posts

46 months

Saturday
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stuthemongoose said:
2b. If CGT level immediately spikes to 30-40%, leave holding in cash for 30 days to fully trigger the CGT at ”old” rate on full holding. Reinvest after 30 days. I cannot see a situation where the markets will increase by the 10+% that CGT liability could go up in that short period. I’d rather bank what I have at the current rate at zero risk than pray for a big market jump to yield same return for 30days.
If you have ISA allowance available, I think you could buy back some or all (depending on the numbers involved) of the ETFs you sell into your ISA straight away, thus crystallising the capital gain for that quantity (and shielding any future gains from tax).

stuthemongoose

Original Poster:

2,376 posts

223 months

Saturday
quotequote all
MadCaptainJack said:
If you have ISA allowance available, I think you could buy back some or all (depending on the numbers involved) of the ETFs you sell into your ISA straight away, thus crystallising the capital gain for that quantity (and shielding any future gains from tax).
Thanks , none available (small violin)