Annual CGT Exemption

B

BIG-notorious

Registered User
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Can someone please clarify if the annual CGT exemption is cumulative or must it be used in the year/only applies to the year of disposal?

Say i buy shares for €10,000 and sell them 5 years later for €16,000 is the entire €6k profit exempt because 5 × €1,270 > €6,000?

Or would i only get the benefit of 1 year's exemption ie leaving my CGT liability as ((€6,000 - €1,270) ×33%)= €1,560.

Apologies if the answer is already posted elsewhere.
 
Yeah, i suspected cumulative would be too good to be true. Always worth checking though!

Crystalising gains on the last trading day of the year and buying on the first world be an easy workaround for smaller sums though.
 
BIG-notorious said:
Crystalising gains on the last trading day of the year and buying on the first world be an easy workaround for smaller sums though
Click to expand...

This used to be known as bed & breakfasting and could be done anytime during the year to use up the allowance. I think it's much more difficult now.
EG you must wait a certain period before buying back.
 
charlie007 said:
EG you must wait a certain period before buying back.
Click to expand...
Are you about that?
I'm not so sure and can't find anything about it.
Are you maybe thinking of the 4 week rule which relates to a different sequence of events (purchase and sale of shares in the same company within 4 weeks)?

Selling or disposing of shares

This page is an explanation of the special rules that apply to CGT on shares
www.revenue.ie
 
In case it matters the maximum benefit to an individual of this sort of B&B process is €1,270 x 33% = €419.
 
It's worthwhile doing every year where you have enough unrealised gains.

Assuming you hadn't used the allowance elsewhere you would have sheltered the entire €6,000 profit in your example from tax. It would have cost you the amount of trading fees and spread each time you sell/rebuy.
 
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Corola said:
Assuming you hadn't used the allowance elsewhere you would have sheltered the entire €6,000 profit in your example from tax. It would have cost you the amount of trading fees and spread each time you sell/rebuy.
Click to expand...
This is only true if the €6,000 gain accrued steadily over the period. If the shares languish in some years and show large gains in others, you can only use the full €1,270 exemption in the years in which there was a gain of at least that amount.
 
Yes where you have enough unrealised gains in that year, and it can be on separate shares.

If share A goes up €1,270 and share B goes down €1,270 - and the opposite happens the next year - you can shelter tax on them each year even though there is no total gain.
 
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To reduce your tax liability by artificially reducing the taxable gain. If you annually sell and re-buy your profitable stocks up to the exemption then you increase their cost basis so the final gain is lower.

Final gain = (sell price - last purchase price)

Which is smaller than (sell price - initial purchase price), since you sold and re-bought after it rose in value.

So you spend a small amount now (trading fees, spread) to reduce tax in the future by a much larger amount.
 
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