Ok learned and heducated people, I have a question which very likely will expose my naivety in these things.
My understanding is that there is a tax free shares allowance of 6k on profits. This is changing to 3k per annum in April.
So easy numbers….
If I put in 10k and turn it into 40k and want to take out the money it’s as follows….
40 - 10 - 6 = 24k at 20% tax, I f I take all the shares out in one hit.
But if I take out 6k as profits in March, then buy 6k of shares again in April then if I sell it all in May I pay….
40 - 16 - 3 = 21k at 20% tax.
Have I simplified it down to crayons level and am missing something obvious ?
I do a U.K. tax return each year so am all above board and am a higher rate tax payer.
No laughing at the back
Dave!
Tax and shares
Re: Tax and shares
You've quadrupled the value of your shares.
So if you want to take out £6k profit "tax free" this year, you'll need to sell £8k worth of shares (that you paid £2k for originally).
So you get £6k, with £32k of shares remaining in your ownership (that you originally paid £8k for).
If you re-invest that then the total value of your shares becomes £38k, and your total investment is £14k (the £8k originally investment, plus your £6k reinvestment)
If you sell all of that in May, then it's
38 - 14 -3 = £21k subject to tax
So you still get more in your pocket, as you've used 2 years worth of allowance.
(And if you don't bother re-investing - just delay the disposition of the remaining £32k of shares until this tax year - you'll have 32-8-3 which also equals £21K subject to tax)
So if you want to take out £6k profit "tax free" this year, you'll need to sell £8k worth of shares (that you paid £2k for originally).
So you get £6k, with £32k of shares remaining in your ownership (that you originally paid £8k for).
If you re-invest that then the total value of your shares becomes £38k, and your total investment is £14k (the £8k originally investment, plus your £6k reinvestment)
If you sell all of that in May, then it's
38 - 14 -3 = £21k subject to tax
So you still get more in your pocket, as you've used 2 years worth of allowance.
(And if you don't bother re-investing - just delay the disposition of the remaining £32k of shares until this tax year - you'll have 32-8-3 which also equals £21K subject to tax)
Re: Tax and shares
So this is a legitimate way to reduce the tax you pay and isn’t something naughty to do etc ?
If so huzzah! It makes a decent enough difference.
Dave!
If so huzzah! It makes a decent enough difference.
Dave!
Re: Tax and shares
So live on 3k a year and stick it to the man!
Dave!
Dave!
Re: Tax and shares
That's bed and breakfasting, Dave - you need to wait 30 days before buying again to avoid CGT: https://www.investopedia.com/terms/b/be ... t-deal.asp
Re: Tax and shares
Damn, so close!
Dave!
Dave!
Re: Tax and shares
You know, you guys talk about stuff like this and I feel like I'm still a kid and you're all, like grownups...
Re: Tax and shares
The problem being I don’t want the money, just reduced tax bill when I do sell in 2 years.
It looked so easy on Wall Street.
Dave!
It looked so easy on Wall Street.
Dave!