Tax on capital gain in uk

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1

Hi!

I need some help on understanding the tax implication of investing in invest t212.

if I invest £100000 in a fund this tax year and sell nothing I won’t pay capital gain this year right?

Let say that it increases by 10% so is worth 110000 the following tax year.

If I sell 50000 next tax year . This is only the money that I invested in the previous tax year so I should not pay any tax on it right?

At what point would I start paying tax on whatever the fund has appreciated?

Can somebody show me a great article somewhere with examples?

Thanks!

2

If you sell nothing, you pay no CGT.

You only pay CGT if:

  1. You’ve realised (sold) some investments, and
  2. Your total gains in that tax year exceed your CGT allowance.

100,000 invested grows 10% into 110,000

When you sell a portion of your investment, you’re taking out some of the original money you invested and some of your profit, at the same time.

When the investment has grown to 110,000:

  • 9.09% of that is profit
  • 90.91% of that is your original capital

How to calculate it:

Growth / divided by / Total, Present Value of Investment
10,000 / 110,000 = 0.0909(090909etc)

If you sell 50,000 - you’re essentially selling 45.45% of the entire, total, present investment value - again some profit, some original investment.

How to calculate it:
50,000 / 110,000 = 0.4545(4545etc) = 45.45%

How to calculate how much of the original investment you’ll be taking out:

100,000 * 0.4545 = 45,455 (rounded up)

How to calulate how much profit you’ll be taking out:

10,000 * 0.4545 = 4,545

To check your maths is correct, add the two, and they should add up the amount you wanted to close in the first place: 50,000 (45,455 + 4,545).

The important thing is that with each sale, you/T212/HMRC look at it as capturing some profit as well as taking out some of your original investment.

You only pay CGT on the realised gains above the annual allowance; your original investment is never taxed (e.g. you’ll pay tax on the 4,545 only not the 45,455, since only the former is profit, the latter is your investment).

If you withdraw funds from an investment that’s in the red, there’s no profit, hence no tax. You’re just taking out your funds.

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3

That’s brilliant . Thank you for giving the math details in a way that I could easily follow :grin:

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4

It is based on the gains you make, not on the value of what you sell. You wouldn’t sell £50 000 pounds but rather lets say 1000 units that would be worth £50 000. To work out the gains you would need to find out what those 1000 units cost, Lets say it was £49 000, that means you made £1000 gain which is what the tax would be based on. So as long as each year the gains you made were under the yearly limit you wouldn’t pay any tax. Just my opinion on how I think it works but best so seek official financial advice.

5

These links may help; I use the second one to calculate my tax on sells

  1. General info

  2. Calculator

6

Perhaps a pension might be a better option ?

7

You can use cgtcalculator.com to work out UK Capital Gains.

I wrote a tool to convert T212 downloaded CSV files into a file for direct use with the calculator.

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To je skvělé jsem moc ráda takové věci úplně bodnou. Těším se keď sa pravidelně budu zapojet do komunikaci a