In March this year I invested £50,000 into an all-world ETF using the Invest option. It has since grown 10%. I realise the Stocks ISA is more suited to my long term investment strategy. My question is about transferring this money from Invest to Stocks ISA without paying CGT. I would like feedback on the following idea…
Sell £20,000 from the Invest account every tax year allowing the remaining amount to grow. Selling £20,000 today (and re-buying in the Stocks ISA) would leave me with £35,000. I could do this next year and probably another year depending on growth.
This is surely more sensible that selling the full £55,000 and paying CGT on the profit of £5000 above £3000, ie £2000. Thoughts?
In principle, your general strategy of staggering the transfer across tax years is correct.
So when you sell a fraction of the holding, you trigger a proportional fraction of the total gain so your realised gain on those 20 grand is £1818.18 which is well below the annual £3000 CGT allowance.
A better strategy would be perhaps if you sell £33,000 worth of ETF, so the cost basis would be £30000, realised gain = £3000, then you hit that allowance to the max. Move £20,000 into the Stocks & Shares ISA immediately to max out this year’s ISA allowance. Top-up your ETF with that £13000 left.
Do remember the 30-day rule. If you sell any part of the ETF then if you re-buy that same ETF within 30 days then the CGT on that part of the disposal will not be realised meaning that the CGT could be incurred in later years. You can, of course, buy a different ETF with that £13,000. Alternatively hold the £13,000 in cash for 30 days and then buy the same ETF.
I believe that if you have disposals of more than £50,000 in a single tax year then you have to declare that disposal on your Tax Return even if the gain is less that £3,000 meaning there is no CGT to pay.