Should I use CGT Allowance each year?

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Andrew365

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Hi,

I have not done the math but logically it makes sense, keen to hear thoughts or what others do? I invest monthly in ETFs with a short term (3- 5yr) investment horizon. I am not emotionally invested in it, so not got a price in my head. The market is pretty buoyant and offers a good risk-reward and my portfolio of ETFs up 11% this year, roughly 2k in absolute terms.

Does it make sense to dispose of enough units to take 1.25k of profit without having to pay tax? I would miss out on the compounding effect given I am taking out a portion each year. However, if I am going to sell in 3-5 years I believe using the CGT allowance each year makes more sense?
 
Capital Gains tax does not apply to gains made from ETFs if the ETFs are based in Europe. These gains are subject to Exit Tax @ 41%

CGT is due on gains made from shares and other assets such as land, property,etc
Before the annual exemption is used, you have to use any losses carried forward
 
jpd said:
Capital Gains tax does not apply to gains made from ETFs if the ETFs are based in Europe. These gains are subject to Exit Tax @ 41%

CGT is due on gains made from shares and other assets such as land, property,etc
Before the annual exemption is used, you have to use any losses carried forward
Click to expand...

:(

Thanks for the clarification. I have no previous losses carried forward, so in this situation I should look at disposing of individual shares I have that have made profits.
 
Andrew365 said:
Hi,

I have not done the math but logically it makes sense, keen to hear thoughts or what others do? I invest monthly in ETFs with a short term (3- 5yr) investment horizon. I am not emotionally invested in it, so not got a price in my head. The market is pretty buoyant and offers a good risk-reward and my portfolio of ETFs up 11% this year, roughly 2k in absolute terms.

Does it make sense to dispose of enough units to take 1.25k of profit without having to pay tax? I would miss out on the compounding effect given I am taking out a portion each year. However, if I am going to sell in 3-5 years I believe using the CGT allowance each year makes more sense?
Click to expand...
The issue around the annual allowance not being open to EFT gains is one to consider. Another would be the decision to 'bed & breakfast' shares in order to realise a gain and utilise the annual allowance. Some of the considerations here have been discussed previously: https://www.askaboutmoney.com/threads/cgt-on-sale-of-shares-bed-and-breakfast-rules.208636/
 
Remember fees and commissions will have to paid on B & B dealings
 
In simple terms if I own shares, that have gone up by 1.25k (CGT Allowance), I have no losses and don't plan to repurchase the same shares. I can sell and not have to pay tax?

If I have 2 shares ( A and B), A has profits of 2k and B has losses of 0.75k. I sell both, there is still no tax due because of the CGT allowance and the 0.75k losses that can be set against the gains?

The issue only arises if I sell share B and then buy back the next day to effectively crystallize the loss?
 
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