Question
If I hold a non-ISA fund on a fund supermarket (e.g. Cofunds, Fundsnetwork or Hargreaves Lansdown) and sell the fund and put the proceeds into a different fund in the same supermarket, will I potential be liable to CGT? Or does the fact that the money stayed within the supermarket mean that the change would not count?Answer
Yes, you would be liable to capital gains tax (CGT).
The only way to avoid CGT on switching investments (aside from using an ISA or pension) is to hold them within a single fund (e.g. unit trust) or investment bond. Fund supermarkets offer the convenience of holding lots of funds in one account, but the funds are still held individually, hence a capital gain or loss is realised every time to you switch/sell.
As it’s not practical to set up your own unit trust you could use a fund of funds (i.e. a unit trust that invests in other unit trusts), but they can be expensive and the fund manager will select the underlying funds held giving you no control.
Using an investment bond gives you greater flexibility as you can choose and switch funds as you like. However, it’s unlikely to be as tax-efficient as using your CGT allowance, as both income and gains from investment bonds are subject to income tax. When held onshore basic rate tax is deducted within the bond. Offshore bonds are more attractive as no tax is automatically deducted, allowing gains to roll-up gross, but you’ll still have to pay tax on annual withdrawals above 5% and eventual surrender (at which point the 5% withdrawals are included in your tax bill calculation).
If I hold a non-ISA fund on a fund supermarket (e.g. Cofunds, Fundsnetwork or Hargreaves Lansdown) and sell the fund and put the proceeds into a different fund in the same supermarket, will I potential be liable to CGT? Or does the fact that the money stayed within the supermarket mean that the change would not count?Answer
Yes, you would be liable to capital gains tax (CGT).
The only way to avoid CGT on switching investments (aside from using an ISA or pension) is to hold them within a single fund (e.g. unit trust) or investment bond. Fund supermarkets offer the convenience of holding lots of funds in one account, but the funds are still held individually, hence a capital gain or loss is realised every time to you switch/sell.
As it’s not practical to set up your own unit trust you could use a fund of funds (i.e. a unit trust that invests in other unit trusts), but they can be expensive and the fund manager will select the underlying funds held giving you no control.
Using an investment bond gives you greater flexibility as you can choose and switch funds as you like. However, it’s unlikely to be as tax-efficient as using your CGT allowance, as both income and gains from investment bonds are subject to income tax. When held onshore basic rate tax is deducted within the bond. Offshore bonds are more attractive as no tax is automatically deducted, allowing gains to roll-up gross, but you’ll still have to pay tax on annual withdrawals above 5% and eventual surrender (at which point the 5% withdrawals are included in your tax bill calculation).
Read this Q and A at http://www.candidmoney.com/questions/question223.aspx
No comments:
Post a Comment