Hello. Do I need to declare the free stocks I got from Freetrade in my self-assessment? Their overall value is small, but it would be especially sad to get tax problems over such a small amount. So I want to do everything right.
As far as I understand I do not need to declare dividends if their amount is under the cap, but I cannot find any information with regards to free shares: do I need to add them to my annual total taxable income?
Capital Gains Tax (CGT) is charged on the gain made from selling an asset. This gain is calculated by deducting the acquisition cost of that asset, together with any costs associated with the acquisition or disposal such as stamp duty or legal fees, from the proceeds of the sale. So, for example, if an individual bought some shares for £100 and sold them for £1,000, with no other incidental costs of acquisition or disposal, the gain would be £900.
The rate of CGT depends on the amount of an individual’s total taxable income and gains from all sources.
-So did you sell the free share?
-And if so, are you within the capital gains tax allowance of £12,300?
If the answer to the above is yes then you don’t pay any CGT
It is set at £2,000 in the 2020-21 tax year. You do not need to tell HMRC if your dividends are within the dividend allowance for the tax year.
Could you adjust your CGT example for scenario in which individual receives share for free, not one in which £100 is paid?
Also, is there no income tax liability on receipt of the free share?
CGT on the free share should be the same. There are circumstances where shares can be considered as income, such as a performance related bonus from your employer, but I don’t believe the free shares from FreeTrade count as such.
The cost to acquire the share was £0 and let’s say you sold it for £3.
£3 - £0 = £3 capital gain.
That assumes that your free share was your only holding for that stock. If you also bought shares in the stock then you just add the free share to the amount that you bought.
You buy shares for a cost of £100. You also receive a free share for cost of £0.
The total cost is £100 + £0 = £100.
You sell all of the shares for £1,000. The capital gain is £1,000 - £100 = £900.
Please if say one made about 10 k gains in a GIA and also made some money in an isa account will he have to pay any tax on the GIA
I hope I have made my question clear
Any feed back will help
ISA is exempt from tax.
10k gain in GIA is within the capital gains tax allowance of £12,300 so you’re fine.
However, you still need to report your gains in your tax return if:
- the total amount you sold the assets for was more than 4 times your allowance which is £12,300 * 4 = £49,200
Thanks a lot
But what I need to know can you earn in both gia and isa same tax free if within the allowance?
What is in your ISA is totally sheltered. It does not need to be declared.
You only pay tax on dividends over £2k outside of ISA and CG over £12300 outside of the ISA.
What you do in the ISA is irrelevant.
Thanks very much
Some questions may be trivial for some but for a newbie it’s very important to us
Thanks once again
Shouldn’t the free share be treated as a “gift” under CGT rules? In this case, the market value of the shares at time of receipt would be calculated for taxation purposes, rather than £0. E.g. receive a free £50 share, its value increases to £60, if sold then capital gain = £10.