Capital Gains Tax - Sell and Re-buy shares?

[joseph_uk_6]

Hey All,

Hopefully a quick one. Say I have £100k invested in an ETF outside of a tax wrapper. It gains around 7% a year (for example) and so after a while it will have increased enough to trigger the CGT allowance.

At this point how do you effectively use your CGT allowance to minimise the bill? Should you sell the ETF ad then re-buy straight away? (Seems like an odd solution). But your £100k would now be £107k and have another 10k to go the following year. Or can you just sell the profit?? Bit confused.

TIA for clearing this one up :)

[frugledoc]

Hey All,

Hopefully a quick one. Say I have £100k invested in an ETF outside of a tax wrapper. It gains around 7% a year (for example) and so after a while it will have increased enough to trigger the CGT allowance.

At this point how do you effectively use your CGT allowance to minimise the bill? Should you sell the ETF ad then re-buy straight away? (Seems like an odd solution). But your £100k would now be £107k and have another 10k to go the following year. Or can you just sell the profit?? Bit confused.

TIA for clearing this one up :)

Cgt allowance is 12k per year.
If you want to harvest 12k of gains and immediately reinvest you need to buy a different ETF or wait 30 days to buy the same ETF.
Can also transfer assets between spouses to maximise gains allowance if required

[frugledoc]

https://monevator.com/an-example-of-defusing-capital-gains/

https://www.gov.uk/capital-gains-tax

[joseph_uk_6]

Thanks. So you could switch which index you were tracking easily enough.

I wonder if switching from one FTSE 100 tracker to another would be acceptable to the taxman.

[frugledoc]

Thanks. So you could switch which index you were tracking easily enough.

I wonder if switching from one FTSE 100 tracker to another would be acceptable to the taxman.

I’m not sure.  I switch between vanguard all world and vanguard developed world for this purpose

[DoctorFI]

I have been looking at this too.  From my understanding re-buying the same asset within 30 days is not allowed and it needs to be different.  Exactly how different is one to question and probably hard to get an answer for. 

I believe i have a good solution for anybody who has a cash ISA that means you are not out of the market for 30 days.  Its what i am thinking of doing:

1) Sell Index funds in Taxable account realising less than £12k profit (get as close as possible)
2) At exactly the same time use my Cash ISA to buy the same funds into my stocks and shares ISA account
3) wait 31 days
4) Sell Index funds in stocks and shares ISA account and put that cash back into my Cash iSA
5) At exactly the same time buy Index funds in Taxable account with money released in step 1

As long as you don't have transaction costs i believe this should realise the profit, allow you stay in the same funds and also ensure you are not out of the market for the 30 days the tax man wants if doing this purely in a taxable account.

I think this would stay within the rules, but if anybody thinks differently it would be good to know

[Playing with Fire UK]

Hi and welcome @DoctorFI

That sounds a solid plan if you are selling something that is less than the cash you have in a cash ISA (for some other reason) and can buy and sell cheaply so cycle larger amounts through. Maybe something to consider at the start of a tax year with a new ISA allowance before you use the allowance for S&S instead? Most people are better off using the ISA allowance for S&S in preference to cash.