UK Capital Gains Tax Question

  1. In the UK, does Trading 212 automatically deduct the CGT (Captial Gains Tax) when we sell a holding? Is the CGT automatically withheld by Trading212 since I have set UK residency?

  2. Or is it up to me to calculate every single stock sold? Do I have to calculate each one and then write it into my self-assessment at the end of the year?

FYI: I am using the investment account (not an ISA). I can’t open a second ISA at the moment so that’s not a solution.

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Me too. Same exactly.
I have no idea.
I wonder if my accountant will do this!!

CGT is something you have to self report, you fill in a form with your tax office, a platform will never do it for you because they don’t know what you earn/lose across all platforms and sources.

if you didn’t earn enough to start paying CGT, or you have traded below a certain amount of funds in the year, you don’t have to self-report.

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Four questions: 1. No, no, 2. yes, yes.

An accountant can do it for you, but it is pretty easy to do it yourself. You can attach pdf printout of a spreadsheet in which the data for each sale appears in a row.

I keep a diary of purchases and sales grouped by instrument and keep it up to date daily. One needs to keep track of average price for Section 104 holdings.

£12,300 CGT allowance per tax year. You only pay tax on gains over this value.

taxed at:
10% Basic rate tax payer
20% Higher rate tax payer

You don’t need to itemise the gains for each stock, just report total gains in the reporting period, you can supply additional information with your return if you did want to provide detail of every trade but I’ve never bothered.

One thing to add is that there is currently speculation that Rishi will scrap or reduce the CGT allowance so the taxable value may increase (probably next tax year)

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You can try this. But HMRC advises differently. Here is a chat I had with HMRC. I wrote:

Thank you for getting back to me speedily.

I would like to give you the feedback that people with whom I discuss this find the idea of reporting hundreds of transactions extremely burdensome. On taxactionweb.co.uk there are these comments

"Many years ago one of our clients started CFD trading.

He enclosed a 20 page document detailing all of his transactions… it took one of our trainees 3 days to complete the CGT pages of his tax return… I think the client made about £50 profit overall."

But obviously the client made a loss once accountancy fees were factored in!!

Someone else writes

“You could always complete the return with a summary of the total movement in the account and as long as you report all tax there should be no loss of tax but if HMRC were to investigate they’d probably want a breakdown of each transaction.”

I was wondering if the above suggestion of attaching a summary of total losses, or gains and net gains in the account would be sufficient. You seem to be saying" No, it would not be."

The reply was

Thank you for the feedback.

I’m sorry but we do need an attachment showing a breakdown of the individual transactions.

I’ve been wondering this for a while too and just seem to be going around in circles on the gov.uk web.

Is CGT free allowance different to your personal tax free allowance? i.e. Do we get £12,500 personal allowance on our salary etc. + £12,300 gains allowance as standard (before you factor in higher band earners etc.)?

Thanks

Yes, they are separate allowances. You can use both.

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Ideal thanks. Be selling off the majority of my invest account & transferring into an ISA next tax year so handy to know.

I started trading recently my gains are about 40%. For example: invested 100k in July and now my portfolio is 140k. If I pull out only 100k do I still have to pay tax? My bank will only show 100k moved out and came back in, hmrc won’t know that I have 40k in stocks still invested.

Going forward next year if I pull out more lets say 20k then on that money I should be paying tax, isn’t it?

Your 140k is 40/140 gains. So if you withdraw 100k the taxable gains will be 100k x 40/140 = 28571.

The tax free allowance is 12300 so you will owe tax on 28571 - 12300 = 16271.

If there are no further gains and you withdraw a subsequent 20k then that will contain gains of 20k x 40/140 = 5714.

In fact it is a bit more complicated because it depends what you sold to withdraw the 100k. The above calculation is only correct if everything was the same stock, eg you only bought and sold Tesla. Otherwise you will need to calculate gains per instrument. Of course there is no tax to pay on withdrawal of cash that was never invested. If any dividends have been received they are taxed under other rules.

Self reporting of tax liability in the UK is on an honour system, with checks and audits by HMRC and its computers, but with severe penalties if false reporting is discovered. Trading 212 may also be reporting details of client account balances to HMRC. A client’s bank will know that the money went to and from a brokerage account. It is not uncommon for HMRC to write to someone saying, “we think you have undeclared income.”

Accountants and financial institutions are under an obligation to submit a Suspicious Activity Report to the authorities if they have any reason to think a client is engaging in money laundering or tax evasion.

@Richard.W thanks that is very helpful formula.

Another question:
I am high rate tax payer and my wife is low tax payer, we both share a joint bank account.

I opened two trading212 accounts one for me and one for wife. Deposited 25k in mine and 75k in wife’s. Both accounts are now in profits mine 30 and wife at 110

If I want to pull out some cash like 50k or 100k then what could be the best way? In joint bank account the transactions may only show money coming from trading212 so should I be able to use wife plus mine CGT allowance irrespective of which 212 account i withdraw?

Like i can withdraw 100k from wife’s 212 account to our joint bank account and use mine plus wife’s CGT allowance?

Something of HMRCs site for you here.

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

It’s the gain you make that’s taxed, not the amount of money you receive.

Example You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).

Bare in mind you have a tax free allowance on capital gains for £12300.00.

Hope that simplifies things.

Unfortunately not. The bank account to which the money is withdrawn is completely immaterial. You can use your tax free allowance only against gains made in your stocks and shares account. Similarly, your wife’s tax free allowance can be used only against gains made in her account. The best thing will be to try to realise gains of 12300 in each account. Above that it is better to take gains for your wife as her tax rate is lower.

I would say that each person has a tax free allowance so why not make most of it from both parties.

We have two trading212 accounts and we share same bank. So CGT free allowance should be double isn’t it? Does it matter which 212 account i stock I sell and withdraw money from?

See my previous answer above. You have two allowances but they are completely segregated, as if you and your wife were total strangers. You cannot combine the allowances.

Thanks that explains.

Richard does have a point. If HMRC were to question what the source of the Capital gains were you would only be able to show your invest account being debited.

Not saying they will but big if they do then you don’t want to be stumped.