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Capital Gains Tax
Tax Calculations
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| Specify CGT summary | CGT calculation |
Stockmarket Investor 4 will calculate capital gains tax (CGT) liability for each sale or for your current holding and show a detailed calculation of the tax liability. The calculation will use the new CGT rules for sales after April 2008 and the old rules for sales before then. It will show the tax due at the higher or lower tax rate.
The new rules for sales after April 2008 do not allow taper relief or indexation and pool all purchases in the same class when deciding which shares have been sold (there are exceptions to this rule).
The old rules for sales before April 2008 allow for indexation up to April 1998 and taper relief afterwards.
Investor 4 can also be used for company tax liability where indexation is still in use.
The programs can show a summary of all sales made during one tax year with itemised gains and losses for each share and the tax due at the higher or lower tax rate.
It can also show a summary of the potential gains or losses for your current shareholdings if they were sold.
Each individual calculation takes account of scrip issues, rights issues, part payments, partial sales, etc and shows the effect of each event.
CGT Rules [Sales after Apr08]
In 2008 the rules were changed abolishing all indexation and taper relief. In its place all purchases of shares in the same class would be pooled and taxed at a standard rate.
The identification rules for share sales were changed to give three categories of share sale to be considered to match a sale with a share purchase.
Although much simpler than the previous system there are still potential pitfalls. You may still need the identification rules for partial share sales before April 2008 to work out the correct purchase price to calculate the gain.
CGT Rules [Sales from Apr98 to Apr08]
In 1998 the rules were changed freezing the indexation of gains and introducing taper relief. The new system was vastly more complicated than the previous one and has been difficult even for accountants and tax inspectors to understand.
Taper relief meant that capital gains tax was applied only to a percentage of the gain. The percentage depended upon how many years the share had been held. If a shareholding was bought in several stages on different dates, the taper relief had to be applied separately to each part of the shareholding.
The identification rules for share sales were changed to give seven categories of share sale to be considered to match a sale with a share purchase.
We incorporated the new identification rules for share sales after April 1998 and taper relief for capital gains including the re-allocation of losses to reduce other gains before taper relief.
Bed and Breakfasting
After April 2008 there are three categories of share sale to be considered to match a sale with a share purchase.
[Before April 2008 there were seven categories of share sale to be considered to match a sale with a share purchase.]
In both cases the first is purchases made on the same day as the sale. The second is purchases made during the 30 days following the sale. This second category means that if you sell a share and subsequently rebuy it (bed and breakfasting), the process will not realise a gain (or loss) from the original purchase.
You can therefore not use this method to realise a gain in order to use up your annual tax exemption amount.