Duke of Marmalade cgt point

[p walsh]

I saw this in other thread, and can't understand it.

Example: Fund worth 1.5m at start of year. you make 5% of 1.5m; fund now worth 1.575m
Cash in 25.4k; that's 1.6% of your holding
Capital Gain = .016 x (1.575 - 1.5) = 1,200
The point is that you have only realised a small fraction of your capital gain

Surely you are charged 33% CGT on the 75k gain?

Sorry for not understanding this but would really appreciate some clarity! TY

 

[Blackrock1]

CGT is linked to date of disposal, you dont pay CGT on shares you still hold, its an unrealised gain.

 

[cremeegg]

You gotta love the Duke.

Its confusing as hell, its wrong, and yet at a certain level he's right.

Confusing, well obviously. I mean who works things out like the above. Actuaries perhaps, but they already understand what is happening. It a good job accountants are not so cavalier, because the rounding error in the above example mistakenly leads him to conclude that no tax is due whereas there is a small liability if you sell €25,400 of shares.

He is wrong because 1.6% of €1,575,000 is €25,200 and not €25,400

He is right because

You sold shares for €25,200. (not €25,400)

They cost you €24,000

So you made a profit €1,200 so no Capital Gains Tax due.

The remaining shares will be subject to CGT if and when you sell them.

 

[Duke of Marmalade]

You gotta love the Duke.

Its confusing as hell, its wrong, and yet at a certain level he's right.

Confusing, well obviously. I mean who works things out like the above. Actuaries perhaps, but they already understand what is happening. It a good job accountants are not so cavalier, because the rounding error in the above example mistakenly leads him to conclude that no tax is due whereas there is a small liability if you sell €25,400 of shares.

He is wrong because 1.6% of €1,575,000 is €25,200 and not €25,400

He is right because

You sold shares for €25,200. (not €25,400)

They cost you €24,000

So you made a profit €1,200 so no Capital Gains Tax due.

The remaining shares will be subject to CGT if and when you sell them.

Well cremeegg I was wrong but you were wrong about why I was wrong. Sort of backstop on the backstop.
Looked up the original thread. The point was to realize €25,400 so that the 5% gain would be €1,270, the CGT exemption. But even that is slightly wrong because 5% gain on the original is only 4.76% of the final. Thus in the example the optimal sale amount is €26,670.