CGT on the Sale of Shares

THIS ARTICLE CONTAINS GENERAL INFORMATION ABOUT CAPITAL GAINS TAX, IT IS NOT SPECIFIC ADVICE AND IF YOU THINK YOU NEED TO PAY CGT PLEASE SEEK SPECIALIST ADVICE OR CONTACT THE TAX OFFICE.

To calculate if you need to return a Capital Gains Tax (CGT) you need to follow the following steps:

N.B. There is no CGT payable on shares held inside an ISA or SIP, if you have your shares in these “Tax Wrappers” then you do not need to calculate your gains or report them to HMRC.

1    Step 1: Find out how much you received, this will normally be the sale price, but, if you gave the asset away for free or a reduced rate to someone that is connected to you then you will need to use the current market value.  (There is a special exemption to passing assets to legal spouse)  

2       Step 2: Work out the cost that was paid, this is normally the price paid at the point of purchase but again there are cases when you may need to calculate the market value, for example where you received a gift or if it was owned before 31/03/1982 for which you can use the value at that date.

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      Step 3: How much you spent to buy and sell the shares, when calculating CGT you can deduct the money spent on Stamp Duty, Valuations, Solicitor’s Fees and broker fees.

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      Step 4: Work out the gain or loss, Subtract the loss from the gain to give you your CGT liability. 

      

      Example: If you sold £100,000 worth of shares that you bought for £10,000 and that you incurred £1,000 worth of fees on you would calculate it as 100000-(10000+1100) = £88,900 

5        Step 5: If you have other CGT liable assets you must work out this calculation for each asset separately.

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      Step 6: Subtract the Personal CGT allowance (For 2013-14 this was £10,900) 

      

      So on our £88,900 gain you will be liable to pay CGT on £78,000

7       Step 7: Calculate your tax due, CGT is payable at 18% for basic rate and 28% for higher rate tax payers 

      

      So assuming you are a higher rate tax payer the tax due on the £78,000 will be liable for £21,840.

When you know that you are liable to pay tax you will need to fill out what you owe on a Self Assessment form, you must register for Self Assessment on the 5^th October following the April you are claiming for. (So for Tax year 2013-14 you must sign up by 5^th October 2014) and pay what you owe by the 31^st January of the following year (Tax year 2013-14 must be paid by January 2015)

If you do not make more gains than the personal allowance you do not need to fill out a self assessment form. If you do owe tax then the section you need to fill out is called the Capital Gains Summery Supplementary Pages.