Carlton
(Carlton Dickson)
15 December 2020 15:45
#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
Assuming Iāve 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)
Iām a higher rate tax payer, so from what I understand Iām expected to pay 20% on any gains over Ā£12,300
There were no gains in this scenario but Iām withdrawing way over Ā£12,300, does capital gains apply to this scenario?
Big gains!
Assuming Iāve 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 £80,000
I want to take my invested amount (Ā£40,000) out of the ISA
Iām a higher rate tax payer
Again Iāve taken out an amount equal to my initial investment, but have the gain left in the account
So in the first scenario Iām confused at how you get your money out assuming you havenāt made gains but are taking a large sum over the threshold.
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 donāt have any capital gains to start with.
3 Likes
EuanG
15 December 2020 16:00
#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.
1 Like
Carlton
(Carlton Dickson)
15 December 2020 16:27
#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. Thatās 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¦
[image]
Last update: 10th April 2019
āTax doesnāt have to be taxing.ā
So says everyoneās favourite advert from HMRC. Well, it doesnāt have to be, but theyāre making a good go of ensuring that it is.
Contrary to their claim, tax is a complex subject.
However, there are a number of factors that make tax on stock market investments a bit more simple and much less burdensome than other types of tax.
This is great: we generally like to simplify and clear up information asymmetry asā¦
Itās ISA Season!
[image]
Things are going pretty great. Youāre interesting, funny and probably more intelligent than average. Youāve got a sweet job (or a not so sweet job)⦠Youāve got a job! All is well.
And now youāre thinking āhey, it might be good to set something aside for the future.ā Or get a snack. No! Stick with your first impulse.
Yes, it is a good idea to set something aside for the future. You can have the snack later: time to start saving.
In the UK, one of the best wā¦
2 Likes
EuanG
15 December 2020 16:43
#5
Itās 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 Iād multiplied by the exchange rate rather than dividedā¦
1 Like