Capital Gains Tax - Shares

[R8BWT]

Due to some recent luck with some shares I've crossed the IHT threshold should I sell. To try and mitigate my exposure am I right in thinking I can do the following:

Numbers are made up for sake of example

10,000 shares bought for average of a £1.
Shares now worth £3.
£20k profit which would be liable for IHT minus this years allowance (circa 10k)should I sell them all.

To reduce expense:
Can I sell 5000 shares this tax year, (=15k - 5k cost - allowance = no IHT) and re-buy instantly meaning the shares have then cost me 20k, so next tax year I could in effect sell 30k worth (20k purchase cost + new 10k allowance)

Thus only having to spend £30 on buying / selling costs, and saving 10k worth of Capital gains tax.

Hope this makes sense.... it does in my head.

[Newc]

Generally yes, except that you cannot buy back immediately, you have to wait for 30 days.

Are you married ? If your spouse isn't over the CGT limit there are options to look at there.

[CaptainSensib1e]

R8BWT said:

Due to some recent luck with some shares I've crossed the IHT threshold should I sell. To try and mitigate my exposure am I right in thinking I can do the following:

Numbers are made up for sake of example

10,000 shares bought for average of a £1.
Shares now worth £3.
£20k profit which would be liable for IHT minus this years allowance (circa 10k)should I sell them all.

To reduce expense:
Can I sell 5000 shares this tax year, (=15k - 5k cost - allowance = no IHT) and re-buy instantly meaning the shares have then cost me 20k, so next tax year I could in effect sell 30k worth (20k purchase cost + new 10k allowance)

Thus only having to spend £30 on buying / selling costs, and saving 10k worth of Capital gains tax.

Hope this makes sense.... it does in my head.

What you are referring to used to be called bed & breakfasting and is a loophole now closed. It doesn't count as a disposal for capital gains tax purposes unless you wait at least 30 days before repurchase.

However if you sell the shares and repurchase in an ISA, it will count as a disposal for CGT purposes. The ISA allowance is £11,280 so you could do a third of the shares now, and a third in the new tax year. Plus once the shares are in an ISA you will never have to worry about any future tax liability.

[R8BWT]

Un(fortunately) not... wasn't aware of the 30 day rule.

[R8BWT]

That appears to be a more sensible option.... Will look in to opening a Share ISA, should have done it in the first place, just didn't think they'd rise enough to warrant any concern!

[Newc]

R8BWT said:

Un(fortunately) not... wasn't aware of the 30 day rule.

You can also set something up with a family member or friend; has to be someone you trust giving 15k to...

As above, ISA is your best bet. Your existing broker will almost certainly offer this. Clock's ticking though - only 9 days to go.

[R8BWT]

Newc, thanks for your assistance. Just applied for the stock ISA so hopefully set up in the next couple of days. I will then buy the full allowance worth of the share and dispose of the same amount in my normal stock account. I will then do the same come april (In anticipation the shares will rise further)

No real need to sell, so will drip feed this way to mitigate exposure.

Thanks again

[walm]

I think the above makes a lot of sense BUT timing is key here since you are running out of time.

My first priority would be to sell the right number of shares ASAP to bank in the usage of my full CGT allowance (not IHT - you're not dead yet!).

Then - if your proceeds are say £20k, put the max into your 12/13 ISA allowance and then put the remainder into your 13/14 ISA on April 8th.

That way you have maxxed:
12/13 CGT
12/13 ISA

Which BOTH have a significant deadline on them!!!