Capital gains tax and initial investments

First Time Investing šŸ£
#1

Hi,

Was hoping I could get some help with understanding capital gains tax and understanding how it works with regards to your initial investment

Let me describe 2 scenarios that I was looking for a bit of clarification onā€¦

No gains :sob:

  • Assuming Iā€™ve maxed out my ISA over 2 years (Ā£20,000 + Ā£20,000) and invested it in company X @ Ā£1.00 per share
  • The price remained exactly the same value
  • I want to take all of my invested money out of the ISA (Ā£40,000)
  • Iā€™m a higher rate tax payer, so from what I understand Iā€™m expected to pay 20% on any gains over Ā£12,300

There were no gains in this scenario but Iā€™m withdrawing way over Ā£12,300, does capital gains apply to this scenario?

Big gains! :rocket:

  • Assuming Iā€™ve maxed out my ISA over 2 years (Ā£20,000 + Ā£20,000) and invested it in company X @ Ā£1.00 per share
  • The share price doubled so my portfolio is now Ā£80,000
  • I want to take my invested amount (Ā£40,000) out of the ISA
  • Iā€™m a higher rate tax payer

Again Iā€™ve taken out an amount equal to my initial investment, but have the gain left in the account

So in the first scenario Iā€™m confused at how you get your money out assuming you havenā€™t made gains but are taking a large sum over the threshold.

#2

Neither scenario creates a tax liability imo. ISAs are tax free.
Also, capital gains taxes are levied on capital gains. In the first example you donā€™t have any capital gains to start with.

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#3

Yes, as Seb stated there are no taxes to pay in either scenario as the assets were within the ISA wrapper.

If instead you had invested via the GIA then there would be tax to pay in scenario 2.

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#4

Thanks guys, I think I was focusing too much on the CGT side of things and reading up on that too much when I should have just focused on ISAs and things around that. Thatā€™s really refreshing to know!

Some useful posts I brushed over but missed the specifics of an ISA, I feel totally stupid as these explain it pretty clearly nowā€¦

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#5

Itā€™s easily done and every day is still a school day in investing for me. I was researching something the other day and the results looked fantastic until I realised Iā€™d multiplied by the exchange rate rather than dividedā€¦ :rofl:

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