The Lemon Fool

I've made a fair bit of money (>>£10k) on some long-term buy and hold tracker funds, and am looking at avoiding/minimising CGT.
However, it does seem as if there really isn't any way of avoiding it, as the annual exempt limit is only £2,000 - does that seem right?
Is it possible for me to transfer some shares to my wife, to use her CGT exemption allowance.

I'm also thinking that Labour may well increase CGT rates, so if that's a likely possibility, is it sensible to crystallise my gains now, and then at least I'll only pay 20% tax rate. (If I did that, I'd just sell my various tracker funds, and then use the funds to buy similar tracker funds, to reset the gains back to zero).

Also, having never paid CGT, is that something that AJ Bell will handle, or will I need to request a self-assessment form?

Grateful for any thoughts/advice.

zico wrote:I've made a fair bit of money (>>£10k) on some long-term buy and hold tracker funds, and am looking at avoiding/minimising CGT.
However, it does seem as if there really isn't any way of avoiding it, as the annual exempt limit is only £2,000 - does that seem right?
Is it possible for me to transfer some shares to my wife, to use her CGT exemption allowance.

I'm also thinking that Labour may well increase CGT rates, so if that's a likely possibility, is it sensible to crystallise my gains now, and then at least I'll only pay 20% tax rate. (If I did that, I'd just sell my various tracker funds, and then use the funds to buy similar tracker funds, to reset the gains back to zero).

Also, having never paid CGT, is that something that AJ Bell will handle, or will I need to request a self-assessment form?

Grateful for any thoughts/advice.

Yes you can transfer to your wife and use her CGT allowance as well. Transfers to spouses are exempt from CGT (there are a couple of exceptions but these relate to business assets or if the couple is separated). The transferred shares for CGT purposes are treated as if the spouse bought them when you bought them in the first place.

You each get a CGT allowance under which you don't pay any CGT, this is £3,000 for the 2024/25 tax year (it was £12,300 as recently as 2022/23; those were the days (sigh!)). So that's potentially £6,000 of capital gains that can be crystallised tax free. Below is a link to HMRC's website showing the CGT allowances for the last few tax years:

https://www.gov.uk/guidance/capital-gains-tax-rates-and-allowances

Unfortunately you have to deal with CGT yourself via a self assessment form. Brokers don't involved with CGT because their clients may have sold other assets elsewhere. You have to report capital gains if they exceed the allowance, or if the gains are less than the allowance but you sold more than £50,000 of assets in the tax year.

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

You can buy similar tracker funds to avoid the problems with "bed and breakfasting". But not the same fund because if you buy back the same investment within 30 days of selling it you won't have crystallised the capital gain as HMRC treats it as not having been sold it in the first place.

zico wrote:I've made a fair bit of money (>>£10k) on some long-term buy and hold tracker funds, and am looking at avoiding/minimising CGT.
However, it does seem as if there really isn't any way of avoiding it, as the annual exempt limit is only £2,000 - does that seem right?
Is it possible for me to transfer some shares to my wife, to use her CGT exemption allowance.

I'm also thinking that Labour may well increase CGT rates, so if that's a likely possibility, is it sensible to crystallise my gains now, and then at least I'll only pay 20% tax rate. (If I did that, I'd just sell my various tracker funds, and then use the funds to buy similar tracker funds, to reset the gains back to zero).

Also, having never paid CGT, is that something that AJ Bell will handle, or will I need to request a self-assessment form?

Grateful for any thoughts/advice.

As has been pointed out, the exempt limit is £3,000 this year. Conservative plans were for it to go down to £1,000 next year (it was £12,300 in 2022-2023 and people are fretting about Labours tax plans!). Personally I wouldn't expect a Labour government to reverse that planned cut - indeed I would even applaud it's total abolition - in the spirit of simplifying an overly complex tax system

Your notion of switching to similar trackers is just one possibility, but how confident are you in the performance of another set of trackers?

Another possibility is to sell, sit on the proceeds for over 30 days and then rebuy what you used to hold. Sure, you are out of the market for a month, but is that a big deal? Can even work in your favour if the market falls.

77ss wrote:Conservative plans were for it to go down to £1,000 next year (it was £12,300 in 2022-2023 and people are fretting about Labours tax plans!).

Are you sure about this? In the 2022 autumn statement they announced two sequential cuts (to £6k for 2023-4, and then to £3k to 2024-5). But has there been a proposal of a further cut beyond that?

londoninvestor wrote:

77ss wrote:Conservative plans were for it to go down to £1,000 next year (it was £12,300 in 2022-2023 and people are fretting about Labours tax plans!).

Are you sure about this? In the 2022 autumn statement they announced two sequential cuts (to £6k for 2023-4, and then to £3k to 2024-5). But has there been a proposal of a further cut beyond that?

Yeah I do not recall anything below £3,000 a year either. Frankly it would not be worth having an allowance that low.

My taxable gains each year are typically about £50,000 and so the CGT-free allowance is already moot. That said I am happy to pay 10% and 20% CGT. My real worry is those rates going up and back towards what they were when we had indexation of gains.

londoninvestor wrote:

77ss wrote:Conservative plans were for it to go down to £1,000 next year (it was £12,300 in 2022-2023 and people are fretting about Labours tax plans!).

Are you sure about this? In the 2022 autumn statement they announced two sequential cuts (to £6k for 2023-4, and then to £3k to 2024-5). But has there been a proposal of a further cut beyond that?

Hands up - I can't find any reference to £1000 - I must have got the wrong end of the stick somewhere.

Thanks for the correction

Have you considered rebuying same/similar instruments within an ISA? Does nothing for current CGT issues but may assist with future gains. Also can avoid the 30 day gap re buying again. (Bed and ISA)

Lootman wrote:

londoninvestor wrote:Are you sure about this? In the 2022 autumn statement they announced two sequential cuts (to £6k for 2023-4, and then to £3k to 2024-5). But has there been a proposal of a further cut beyond that?

Yeah I do not recall anything below £3,000 a year either. Frankly it would not be worth having an allowance that low.

My taxable gains each year are typically about £50,000 and so the CGT-free allowance is already moot. That said I am happy to pay 10% and 20% CGT. My real worry is those rates going up and back towards what they were when we had indexation of gains.

Keeping a low allowance keeps very small gains out of tax reporting/self assessment. Do not think HMRC wants all small gains reported (they cannot even deal with the number of taxpayers who do Self Assess)?