Capital Gains - tax return 23/24

[teecee90]

Next tax return query .....

I've disposed of shares in 23/24 and used the HMRC online calculator to confirm that there is no tax to pay (gains net of costs were just shy of of the £6k annual exemption). However, the HMRC calculator gave the following message at the end... "You will have to report your Capital Gains Tax figures through Self Assessment. You must do this, even though there is no tax to pay"

When starting to complete my 23/24 self assessment this morning, the section which determines which pages need to be completed states this for capital gains:

"You must report your capital gains and attach your computations if in the tax year either:
- you disposed of chargeable assets which were worth more than £50,000
- your chargeable gains, before the deduction of any losses, are more than £6,000 (the Annual Exempt Amount)
- you have gains in an earlier year taxable in this period
- you want to claim an allowable capital loss or make any other capital gains claim or election for the year"

None of this applies to me so I'm not sure why the online calculator indicated that I need to report it.

[Adamski]

Hi there, you're right if proceeds below £50k and gains below £6k don't need to report it.

Are you doing your return early?

I wait until July/Aug once get reports from investment provider. They should produce tax return information and capital gains report, on (taxable) dividends and capital gains. They send those reports to hmrc, and you'd want them to agree?

[teecee90]

I'm doing the return early just to confirm the calculation of tax due is consistent with my own records, but wont be submitting it until I've got all the relevant documentation. It is saved and just sits on the HMRC website until you click the submit button.

[mike]

Hi there, you're right if proceeds below £50k and gains below £6k don't need to report it.

Are you doing your return early?

I wait until July/Aug once get reports from investment provider. They should produce tax return information and capital gains report, on (taxable) dividends and capital gains. They send those reports to hmrc, and you'd want them to agree?

For the dividends, yes, it is reported, but for capital gains, no, as they will not have the required information.

Any individual broker cannot know your buy "Section 104" price, as you may hold the same stock over more than one broker, or even in certificated form. It is your total holding over all broker and certificated holdings combined that gives the s104 price, and hence the gain.

[scrumpyjack]

The limit for reporting used to be 4 times the CGT allowance so perhaps as the allowance for 23/24 is £6,000, the reporting limit is £24,000?

Correction - Taxcalc says it is still £50k

[GPhelan]

The reporting limit WAS 4 x CGT Allowance, but with the substantial reduction in the Allowance, then that would result in millions of reports being computed and supplied that HMRC does not want to see. The limit was changed to £50k from 2023-2024 tax year.
Read it here: https://www.gov.uk/capital-gains-tax/wo ... eed-to-pay

[Lootman]

Hi there, you're right if proceeds below £50k and gains below £6k don't need to report it.

Are you doing your return early?

I wait until July/Aug once get reports from investment provider. They should produce tax return information and capital gains report, on (taxable) dividends and capital gains. They send those reports to hmrc, and you'd want them to agree?

For the dividends, yes, it is reported, but for capital gains, no, as they will not have the required information.

Any individual broker cannot know your buy "Section 104" price, as you may hold the same stock over more than one broker, or even in certificated form. It is your total holding over all broker and certificated holdings combined that gives the s104 price, and hence the gain.

I agree that the consolidated tax certificates do not include information for proceeds and cost basis for disposals. At least I have never seen one that does, although your broker will have that information in most cases.

I would expect that to change in the future. US brokers already have to provide such information annually to investors, and to the taxman of course. The current UK "honour system" for CGT will probably also cease at some point.

By the way I always wait 30 days after the end of a tax year before computing my gains. Just in case there is a repurchase within 30 days of a security sold at the end of the prior tax year.

[Gersemi]

For the dividends, yes, it is reported, but for capital gains, no, as they will not have the required information.

Any individual broker cannot know your buy "Section 104" price, as you may hold the same stock over more than one broker, or even in certificated form. It is your total holding over all broker and certificated holdings combined that gives the s104 price, and hence the gain.

I agree that the consolidated tax certificates do not include information for proceeds and cost basis for disposals. At least I have never seen one that does, although your broker will have that information in most cases.

I would expect that to change in the future. US brokers already have to provide such information annually to investors, and to the taxman of course. The current UK "honour system" for CGT will probably also cease at some point.

By the way I always wait 30 days after the end of a tax year before computing my gains. Just in case there is a repurchase within 30 days of a security sold at the end of the prior tax year.

I'm intrigued - what is the UK "honour system" for CGT?

[SalvorHardin]

I'm intrigued - what is the UK "honour system" for CGT?

The UK "honour system" for CGT system relies upon the person submitting correct information to HMRC.

HMRC are very cagy about disclosing the sort of information they receive from brokers, custodians, traders, etc. when it comes to capital gains, but it's clearly going to be nothing like as comprehensive as they get on UK deposit accounts (which are automatically sent to HMRC by the institution).

When you have people with shareholdings with multiple brokers (particularly overseas brokers), bearer certificates, plus other investments such as antiques, land, overseas bank accounts, royalties, etc. it will be extremely difficult (and expensive) for HMRC to get completely accurate information themselves. Particularly if it is a cash business.

Look at Angela Rayner. She seems to owe CGT upon a house sale made in 2015, yet this only seems to have come to light very recently because people have been ferretting through her social media accounts looking for dirt.

[Urbandreamer]

Look at Angela Rayner. She seems to owe CGT upon a house sale made in 2015, yet this only seems to have come to light very recently because people have been ferretting through her social media accounts looking for dirt.

I don't know the full facts of that case, do you?

What I do know is that if someone owns more than one property, they can elect which is their principle private residence to HMRC, provided that they have actually lived there at some time while they owned it. Selling the PPR is exempt from CGT.
https://www.gov.uk/tax-sell-home/nominating-a-home

You must have lived in the home as your only or main residence at some point while you owned it.

I question if the story recognizes that ability, or is attempting some moral, rather than legal argument.

[Lootman]

I'm intrigued - what is the UK "honour system" for CGT?

The UK "honour system" for CGT system relies upon the person submitting correct information to HMRC.

HMRC are very cagy about disclosing the sort of information they receive from brokers, custodians, traders, etc. when it comes to capital gains, but it's clearly going to be nothing like as comprehensive as they get on UK deposit accounts (which are automatically sent to HMRC by the institution).

Yes. It seems unlikely that the taxman has the kind of data that it receives from institutions for interest and dividends, let alone for salaries and pensions. It would be easy for brokers to send data on disposal dates and amounts. But accurately reporting cost basis is another matter.

So my best guess is that the taxman rubber stamps 99% of declared gains, and looks only at a small sample of reported gains based on "secret" criteria, that I could take a guess at but won't.

I have been declaring taxable gains for about 20 years now and have never had my submissions questioned. I have stood ready to defend my numbers but the matter has never arisen.

[SalvorHardin]

So my best guess is that the taxman rubber stamps 99% of declared gains, and looks only at a small sample of reported gains based on "secret" criteria, that I could take a guess at but won't.

I have been declaring taxable gains for about 20 years now and have never had my submissions questioned. I have stood ready to defend my numbers but the matter has never arisen.

I've never had a shares CGT return questioned. HMRC gets full disclosure of costs and dates in great detail every year and has done so since I started regularly paying CGT in the late 1990s.

I was audited (including a home visit), in the early 2000s, triggered by IR35 and my "aggressive tax avoidance" (a very low effective corporation tax rate compared to turnover). That was sorted out PDQ in my favour.

Some years ago a retired accountant, who had done a lot of work dealing with HMRC audits, told me after a few beers that he reckoned that one of HMRC's main criteria for investigations was HMRC staff being jealous about how much money the target was making.

[Lootman]

So my best guess is that the taxman rubber stamps 99% of declared gains, and looks only at a small sample of reported gains based on "secret" criteria, that I could take a guess at but won't.

I have been declaring taxable gains for about 20 years now and have never had my submissions questioned. I have stood ready to defend my numbers but the matter has never arisen.

I've never had a shares CGT return questioned. HMRC gets full disclosure of costs and dates in great detail every year and has done so since I started regularly paying CGT in the late 1990s.

I am not sure HMRC cares about dates that much. Obviously they want to know that your disposal is in the tax year being submitted. And they would be interested if a security is sold and then repurchased within 30 days.

But otherwise I doubt that they care about the original acquisition date(s). And the reason I say that is that I always leave them blank and it has never been a problem. (Likewise I enter zero as the number of shares and it is accepted). I think that might be a throwback to indexation, when purchase dates very much mattered.

So it seems to me that the only data item they care about that is not in the sell transaction is the cost basis, and that is the only thing I keep a record of from the original purchase (and any subsequent changes to it).

[genou]

Some years ago a retired accountant, who had done a lot of work dealing with HMRC audits, told me after a few beers that he reckoned that one of HMRC's main criteria for investigations was HMRC staff being jealous about how much money the target was making.

I think in is his cups he had not the wrong end of the stick, but the wrong stick. Serious technical audits ( so "aggressive tax avoidance" ) were, in my day - to be fair, more than "some" years ago - driven centrally, and the local inspectors just followed the party line. I suspect that it's even more centrally controlled now than it was then. Minor technical "adjustments" , i.e. no penalty, just more tax, were frequently exercises for inspectors under training, selected by the DI . I have no clue how, or even if, they are selected now.

Evasion investigations were usually targeted at cash businesses, on the same argument as robbing banks: because that's where the money was.

[SalvorHardin]

I am not sure HMRC cares about dates that much. Obviously they want to know that your disposal is in the tax year being submitted. And they would be interested if a security is sold and then repurchased within 30 days.

But otherwise I doubt that they care about the original acquisition date(s). And the reason I say that is that I always leave them blank and it has never been a problem. (Likewise I enter zero as the number of shares and it is accepted). I think that might be a throwback to indexation, when purchase dates very much mattered.


So it seems to me that the only data item they care about that is not in the sell transaction is the cost basis, and that is the only thing I keep a record of from the original purchase (and any subsequent changes to it).

Dates are useful if they want to quickly check if the cost looks reasonable.

In my case, given that in 2023-24 I made several repurchases within 30 days, I have been very careful to include dates (also share prices and times where there were multiple trades on the same day) for several shareholdings.

[MuddyBoots]

Dates are useful if they want to quickly check if the cost looks reasonable.

In my case, given that in 2023-24 I made several repurchases within 30 days, I have been very careful to include dates (also share prices and times where there were multiple trades on the same day) for several shareholdings.

I've just done a return using the CGT Real Time Transaction Return, (hoping to avoid a full SA return!) based on the capital gains report from my fund manager's website. In addition to units I've sold during the year, there were some automatic sales to cover fees when I didn't have enough cash in my account, so I needed to rely on the website report rather than do the calculation myself. In fact, I don't think I could have done my own calculation without it because when I'm selling units I don't know the corresponding purchase dates/purchase prices of those actual units. So it puts them into a "pool" for the acquisition dates if outside the 30 day rule. I'd need a masterclass in doing the CGT calculation otherwise!! All this complication wouldn't have been needed without the reduction in annual allowance though.

[Lootman]

Dates are useful if they want to quickly check if the cost looks reasonable.

In my case, given that in 2023-24 I made several repurchases within 30 days, I have been very careful to include dates (also share prices and times where there were multiple trades on the same day) for several shareholdings.

I've just done a return using the CGT Real Time Transaction Return, (hoping to avoid a full SA return!) based on the capital gains report from my fund manager's website. In addition to units I've sold during the year, there were some automatic sales to cover fees when I didn't have enough cash in my account, so I needed to rely on the website report rather than do the calculation myself. In fact, I don't think I could have done my own calculation without it because when I'm selling units I don't know the corresponding purchase dates/purchase prices of thosaveragee actual units. So it puts them into a "pool" for the acquisition dates if outside the 30 day rule. I'd need a masterclass in doing the CGT calculation otherwise!! All this complication wouldn't have been needed without the reduction in annual allowance though.

It could be worse however. The UK only allows "average cost basis" for multiple purchases, and that enables all your lots to be pooled.

Imagine instead if the UK had or offered FIFO, LIFO, HiFO, LowFO or specific lot designation.

By using average price the acquisition dates are mostly moot. I do not recommend omitting them but my experience is that there is no problem if you do not know or have them, as long as your cost basis is correct, and you do not fall foul of the 30 day rule.