OV9

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!

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 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!

V8Granite wrote: Thu Mar 07, 2024 11:09 am So this is a legitimate way to reduce the tax you pay and isn’t something naughty to do etc ?

Yes - you're just making full use of your allowance for last tax year plus this tax year.

disclaimer : I am not a tax adviser

So live on 3k a year and stick it to the man!

Dave!

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

Damn, so close!

Dave!

You know, you guys talk about stuff like this and I feel like I'm still a kid and you're all, like grownups...

V8Granite wrote: Thu Mar 07, 2024 12:49 pm Damn, so close!

Dave!

But as noted above - reinvesting in your example above doesn't gain you anything. Just sell in 2 lots in order to utilise - one this tax year, one next year - to utilise your allowance in both years.

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!