Capital Gains Tax

[robertbanking]

I have a small portfolio of stocks i hold and also Index's, however with Capital Gains tax in the UK so high i was wondering the best way to minimise my tax bill please. I know some people hold share dealing accounts under Limited Companies as the taxation rate is different to Personal Capital Gains tax. Does anyone please know if setting up a Limited Company and opening a share dealing account under this Limited Company would be a good way to reduce Capital Gains Tax please?

 

[DontAsk]

i was wondering the best way to minimise my tax bill please.

Use your allowance and don't liquidate all your stocks in the same tax year is the simplest way to avoid CGT.

 

[MikeJ]

Put them into an ISA.

 

[Deleted member 362062]

While setting up a limited company for share dealing can potentially offer some tax advantages, it's important to consider several factors before proceeding with this approach:

• Corporation Tax vs Capital Gains Tax: Limited companies pay Corporation Tax on profits, which is currently 19% (rising to 25% for profits over £250,000 from April 2023), compared to personal Capital Gains Tax rates of 10% (basic rate taxpayers) or 20% (higher and additional rate taxpayers) for shares. This could potentially result in a lower tax rate, depending on your personal circumstances.

• Incorporation Relief: It's crucial to note that transferring your existing personal share portfolio to a limited company would not qualify for Incorporation Relief under s162 of the Taxation of Chargeable Gains Act 1992. This relief is only available for trading businesses, not investment activities. As a result, the transfer could trigger an immediate capital gains tax liability on any unrealized gains in your current portfolio.

• Double taxation: Profits made within the company will be subject to Corporation Tax. When you eventually want to extract these profits as an individual, you'll face additional personal taxation, either through dividends or salary. This could potentially negate any initial tax savings.

• Administrative burden: Running a limited company involves additional administrative responsibilities and costs, including annual accounts, Corporation Tax returns, and potentially VAT returns.

• Investment restrictions: Some investments available to individuals may not be accessible through a corporate structure.

• Future changes: The tax landscape is subject to change, and future reforms could potentially reduce or eliminate any current advantages.

Given these considerations, setting up a limited company solely for share dealing may not be the most effective way to reduce your Capital Gains Tax liability. Instead, consider these alternatives:

• Utilize your annual CGT exemption (£3000 for 2024/25)
• Make use of tax-efficient wrappers like ISAs and pensions
• Consider spreading disposals over multiple tax years to maximise use of annual exemptions
• Explore options for transferring assets between spouses to utilise both partners' allowances

Before making any decisions, it's advisable to conduct a thorough analysis of your specific financial situation and long-term goals. This will help determine the most tax-efficient strategy for your individual circumstances

 

[neilsolaris]

Put them into an ISA.

And maybe a SIPP too.

 

[Bobbo]

however with Capital Gains tax in the UK so high

This is a joke right

 

[Tables Force]

I know some people hold share dealing accounts under Limited Companies as the taxation rate is different to Personal Capital Gains tax.

Depending on your overall income, you might find that the CT rate is actually higher than your personal CGT rate is.

Your other option would be to start selling at a loss.

 

[DontAsk]

Put them into an ISA.

I don't think that's so convenient for share dealing, Annual investment limit is only £20k, so it could rake some years, depending on the size of the portfolio. Not all ISAs allow you to put money back in (within the £20K limit) once you take it out.

 

[neilsolaris]

I don't think that's so convenient for share dealing, Annual investment limit is only £20k, so it could rake some years, depending on the size of the portfolio. Not all ISAs allow you to put money back in (within the £20K limit) once you take it out.

But you can maximise the annual ISA allowance, and then if you have more to invest, invest it outside of the ISA.

 

[pentel]

Max CGT in the UK at the minute is 20%, do you view this as high?

Income tax and NI can be as high as 62% in the UK

 

[MikeJ]

It doesn't matter. He doesn't have a portfolio. He's just a timewaster.