Your capital gains
tax allowance for 2006/2007 is £8,500. Only
the gains over this level are subject to your
marginal rate of tax. Your gain for these purposes
is pure profit, which means you may deduct broker
costs and the 0.5 per cent stamp duty on share
purchases. There is indexation relief on shares
held long enough.
If you are married, your spouse will also have
capital gains tax relief of £8,500, and
you can transfer to your spouse the shares that
you wish to sell, making use of annual allowances,
and your spouse’s tax rate if this is lower
than yours. Or you can sell your shares in a year
when you pay a low tax rate.
HM Revenue & Customs has abolished the bed-and-breakfast
tax loophole where a person could sell shares
and buy them back the following day to crystallize
gains to offset losses. You can now do a bed-and-ISA,
crystallizing a gain, and buying it back in an
ISA, subject to its £7,000 tax free limit.
You can also do a bed-and-spouse, which is when
you sell shares to crystallize a gain and your
spouse buys them back.
