Tax - General investment account

Hi there, really hoping that someone can help me out as I’ve only just recently started started buying stocks and shares in general investment account and I’m not entirely sure about the tax side of things. I have a full-time job and my employer of course does all the tax calculations for me via PAYE, so I have never really dealt with HMRC personally and I’m really not familiar with the process. So please feel to respond to this question as if you’re talking to a complete newbie because that’s exactly what I am! (-:

do i need to complete a self-assessment form even if i made a loss on a stock? Example: I bought a stock in company A, but their stock price started to go down, so I sold it at a loss. do I still need to complete a self-assessment form to prove to HMRC that my sale included a loss and therefore I don’t owe any cgt?

Or

do I only need to submit a self-assessment if I have actually made a profit/capital gain above the capital gain allowance limit?

Final question. For stocks sold in January 2021, I think you can submit self assessment in January 2022, i.e. a year later. Is this correct?

Thank you so much in advance would really appreciate some guidance on this. :pray::relaxed:

D

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I’m also pretty green to this kind of thing and you shouldn’t ever pay attention to what some idiot like me says! Aka, the following isn’t financial advice.

From my own reading, it seems that you don’t need to report a loss. Capital gains is only applicable on gains, so no gains, no reporting it. To the best of my knowledge, you only need report a gain above the capital gains allowance for the tax year in which your holdings were sold.

There are others who can better cover all of this, but I’m definitely unsure about the final part.

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From my understanding you only need declare capital gains if they exceed the allowance, however this doesn’t just include stocks.
Same with dividends until they exceed the allowance you don’t need to declare it.

Unsure on how tax and reits work though

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Hi
This is a very rough explanation.

you have £12k in. capital gains allowance, and £2k in dividend allowance. Anything above this you need to pay tax on and obviously need to declare and do your self assessment etc. anything below this you don’t need to submit a tax return.

however, other things to keep in mind. stocks arent the only thing that are subject to capital gains. If you’re heavily trading back and fourth and you expect to pay CGT then you need to account for all your trades as there are also special rules for buying and selling the same stock within 30 days.

if your only looking at a few thousand and your not trading that much then you wont need to worry about CGT and wont need to submit a tax return.

you can claim losses against gains I believe (but they have to be realised losses as far as im aware)

You may want to consider if an ISA is a better long term option.

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Thank you so much, really appreciate this!

So it sounds like it might be a while before I need to do any cgt reporting (hopefully not too long now before i actually make a decent gain) :relaxed:

Thanks so much for flagging the dividends too, I didn’t consider these. I’ve had a dividend paid out to me by, but it was a very small amount. But really helpful to know for the future! thank you! :relaxed:

Thanks so much for this, it super helpful.

So it looks like I need to look up the 30 day rule, as I wasn’t aware of that one at all.

I’d also recommend looking at whether an isa would be a better long term strategy for you. Unfortunately, taxes can and do regularly change and some are expecting capital gains tax rules to change, perhaps as early as this year.

Noone knows yet if they will reduce an individuals allowance or just change the rate at which your gains above the allowance are charged. Same with the dividend allowance.

They’ll have a much larger public reaction to tax changes that include an isa however.

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As others have mentioned, you do not have to. However, if the amount is somewhat substantial, you might want to do so in order to claim the losses. These will be carried forward indefinitely and there is no need to file a return every year to reaffirm the fact that you have these losses (assuming there is no other reason for you to file). Whenever you will make chargeable gains (i.e. gains in excess of your annual exempt amount), you will be able to reduce these by the amount of losses brought forward, which saves you tax.

Correct, January 2021 disposal falls into the 2020/21 tax year, which ends on 5 April 2021. The self-assessment deadline is 31 January of the following year (i.e. 2022)

If you are a basic rate taxpayer, there is nothing to report. If you are a Higher or Additional rate taxpayer, you need to report your property income distributions (aka REITs) and pay an additional tax (20% and 25% respectively). If you do not pay any tax in the year, you can reclaim 20% deducted at source.

£12,300 to be pedantic :wink:

It might not be at all useful unless you are at risk of breaching your annual exempt amount, but if you are curious, here is some HMRC guidance.

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Only have a couple of stocks in GIA now, as I couldn’t buy them in ISA.

Have opened an ISA now and you’re right, will probably stick to that going forward. Much more straightforward than GIA on tax :upside_down_face:

Thank you so much Wulfy, appreciate it! :relaxed:

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Thank you so much for taking the time Vlad! This is super helpful and makes things much clearer.

This will really help me out. Will also check out the HMRC link. Really appreciate it ! :pray::relaxed:

One more rule to be aware of is that you need to file a self assessment if the total of all of your sale transactions is more than four times the capital gains allowance. This year that’s £12,300 x 4 = £49,200.
This can sneak up on you if you make a lot of low value trades.

E.g. you buy a stock for £1,000 then sell if for £1,000 so your capital gain is £0. Do that 50 times and your gain is still £0 but you have made £50,000 in sales so you need to report it.

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Oh Wow! That’s really good to know and will have to look through to check if I’ve exceeded the limit. Have learnt more on here than I did in school tbh! They really ought to teach more about investments, taxes, etc. in schools.

Thanks so much for this. I really appreciate it! :relaxed::pray:

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You only have to submit a tax return if you have liability. You do not have to submit one to ‘lodge’ any losses. So each year, if you make gains of less than £12,300 there is no CGT to pay. Just keep a note of all your gains and losses, and total your position at each tax year end (5 Apr). When your accumulated position exceeds the CGT allowance, you then have to report, within 9 months of the tax year end. You can’t carry future losses backwards, so a loss the year after paying CGT just starts a new loss pool.

Note also that only closed transactions count, your running profit on open trades is irrelevant.

If you want to crystallize some gains to use up your allowance, and then rebuy, you can’t buy EXACTLY the same instrument within 30 days. However, for funds, it is easy to find one that is pretty much the same.

In reality, if you really thing you’ll make £12k+ gains, you are talking a six-figure portfolio, in which case you should first put as much as possible into an ISA or SIPP.

(Disclosure : I am a tax accountant)

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was jus saying the same thing,

this info really is something that we should be taught and tested on at school, as it’s a total minefield if you get into this later in life.

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If I invest in REITs in my gia account, as a basic tax payer. What are the rules involved.

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This is a good moment to ask why Freetrade doesn’t have a tool to help people know how much gain has been realised. Or at least a good way to obtain a statement to pass to an accountant. Last year I needed to do self assessment and I had to send a customer support message and get somebody to specially hand me a statement. There should be an automated way to do this.

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Yes, I was about to ask
How do people keep track of gains/losses/dividends?

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Spreadsheet?

No different to any other ETF, tax on divs, tax on realised gains. Both subject to your allowances.

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