The UK 30-Day Rule. (CG).

[Burnley]

Brought in to stop Bed & Breakfasting over the end of the tax year, but also means that if you trade within 30 days (at any time of the year) with the same share (buy/sell say 3 times) C&G tax is calculated in a certain way.

Please don't refer me to the HIR site on this one as I have read and read it and still don't understand the explanation (my fault and no body else's), it's just me being a bit thick on this particular subject.

So, I would like to give an example and someone who "definitely " knows the "right answer" can just give me the right words, thank you.

Example: I am already over this years C&G of £9200 before I start.

Start 30 Day cycle:

Day 1: Buy 100 X shares for £1000. sell 100 X shares next day for £2000 = £1000 profit.

Day 5: Buy 100 X shares for £1500. sell 100 X shares 2 days later for £2000 = £500 profit.

Day 10: Buy 100 X shares for £1500. sell 100 X shares 3 days later for £2500 = £1000 profit.

End of 30-Day cycle.

I don't trade that share again within that 30 day period having made £2500 profit.

My questions are 1. How much capital gains would I be liable for with those 3 trades ? 2.What 2 trades do I pair up to obtain the gain?

As I say I'm being a bit thick with all this so can you perhaps put each gain next to each trade so it is crystal clear to me if it's practical for you to do so.

.. and yes I know it would be easier using S/Bs and or other instruments for C&G, but I prefer not to thank you and stick with ordinary shares .

 

[timetotrade]

Hi

The shares that are sold within the 30 day bed and breakfasting period are identified on a first in first out basis, so in your example would be paired as follows:

Day 2 sale matched with Day 5 purchase = gain £500
Day 7 sale matched with Day 10 purchase = gain £500
Day 13 sale matched with Day 1 purchase = gain £1,500


timetotrade
timetotrade.co.uk

 

[timetotrade]

Burnley

If you have lots of share transactions, why don’t you try our CGT calculator, it's included free as part of the basic portfolio management tools (UK residents only).

You just input all of your transactions into your portfolio ledgers (see example: Ledgers - timetotrade )

And then go the Capital Gains page ( eg CGT - timetotrade) and it works out your taxable gains using the HMRC share identification rules and allocates losses etc.

and it’s currently free to use.

All the best
timetotrade

timetotrade.co.uk

 

[Burnley]

timetotrade,

Thank you for the examples and the offer, I will have a look later.

I was surprised that in both our examples the gains turned out to be the same

 

[timetotrade]

Hi Burnley

Overall gain is the same in both examples because you are disposing of the entire holding with no further purchases within next 30 days.

However, if you were to dispose of, eg 50 shares on day 13 instead of 100 shares then the gain would be different in the two examples.

In your example:
Day 1: Buy 100 @ £10 = £1000
Day 2: Sell 100 @ £20 = £2000
Profit = £1000 profit.

Day 5: Buy 100 @ £15 = £1500
Day 7: sell 100 @ £20 = £2000
Profit = £500

Day 10: Buy 100 @ £15 = £1500.
Day 13: sell 50 @ £25 = £1250
Profit = £500

Total profit = £2000
With 50 shares left, purchased for £750


However, using share identification rules:
Day 5: Buy 100 @ £15 = £1500
Day 2: Sell 100 @ £20 = £2000
Profit = £500

Day 10: Buy 100 @ £15 = £1500.
Day 7: sell 100 @ £20 = £2000
Profit = £500

Day 1: Buy 100 @ £10 = £1000
Day 13: sell 50 @ £25 = £1250
Profit = £750 profit.

Total Profit = £1750
With 50 shares left, purchased for £500


Hope that helps.

timetotrade
timetotrade.co.uk