Advertisement
If you have a new account but are having problems posting or verifying your account, please email Niamh on [email protected] for help. Thanks :)
New AMA with a US police officer (he's back!). You can ask your questions here

Capital Gains question

  • 18-11-2020 2:32pm
    #1
    Registered Users Posts: 323 ✭✭ virginmediapls


    Hi,

    I bought a few grand of shares this year, a few weeks back. They are up a good bit.

    I see there's a 1,240 EUR pa dispensation for profits taken on shares.

    Can I sell €1,240 of my shares, take it as profit, and reinvest it next year? Could I do this every year so I eventually don't need to pay tax on the profit?

    I know this is probably not the case, just trying to understand it.


Comments

  • Registered Users Posts: 3,030 ✭✭✭ Browney7


    Hi,

    I bought a few grand of shares this year, a few weeks back. They are up a good bit.

    I see there's a 1,240 EUR pa dispensation for profits taken on shares.

    Can I sell €1,240 of my shares, take it as profit, and reinvest it next year? Could I do this every year so I eventually don't need to pay tax on the profit?

    I know this is probably not the case, just trying to understand it.

    You'd need to realise 1240 of profit so will need to sell more than 1240 of shares unless you got the shares for free!


  • Registered Users Posts: 17,031 ✭✭✭✭ namloc1980


    The annual CGT allowance is €1,270 of chargeable gain so, assuming you have no other CGT chargeable gains this year, you can realise a profit on the shares of up to €1,270 before the end of the year without incurring any CGT liability and can do this each year. You can reinvest that gain as soon as you want. Remember though that even if you don't have a CGT liability you are still obliged to make a CGT return to the Revenue.

    https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/when-and-how-do-you-pay-and-file-cgt.aspx

    When to file your CGT return?
    You must file by 31 October in the year after the date of disposal. You must do this even if no tax is due because of reliefs or allowable losses.


  • Registered Users Posts: 3,689 ✭✭✭ 3DataModem


    As above posters, here's a simple worked example.

    Let's say hypothetically you purchased 10k shares at 1 euro each, and they are now worth 2 euro each i.e. 20k, and they never go up again.

    2020: Sell 3,720 worth (1,860 shares), profit is 1,240, zero tax due - you have 3,720 in cash and 16,280 worth of shares
    2021: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 7,440 worth of shares: you have 20k worth of shares
    2022: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2023: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2024: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2025: sell 1,400 worth (700 shares), profit 462, zero tax due, buy 1,400 worth of shares: you have 20k worth of shares

    You end up with 20k worth of shares.

    The purchase price for ALL the shares is deemed to be 2 euro (you don't have any 1 euro shares left), so if you sell them you pay no tax.

    Of course, share prices are not that simple.


  • Registered Users Posts: 226 ✭✭ donnaille


    3DataModem wrote: »
    As above posters, here's a simple worked example.

    Let's say hypothetically you purchased 10k shares at 1 euro each, and they are now worth 2 euro each i.e. 20k, and they never go up again.

    2020: Sell 3,720 worth (1,860 shares), profit is 1,240, zero tax due - you have 3,720 in cash and 16,280 worth of shares
    2021: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 7,440 worth of shares: you have 20k worth of shares
    2022: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2023: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2024: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2025: sell 1,400 worth (700 shares), profit 462, zero tax due, buy 1,400 worth of shares: you have 20k worth of shares

    You end up with 20k worth of shares.

    The purchase price for ALL the shares is deemed to be 2 euro (you don't have any 1 euro shares left), so if you sell them you pay no tax.

    Of course, share prices are not that simple.

    I know this is a simplified example, and I'm not fully aware of the Irish system having been abroad a number of years but I'd hazard a guess that you would need to wait 28/30? days between selling and buying to avoid falling foul of 'bed & breakfasting' rules.


  • Registered Users Posts: 3,689 ✭✭✭ 3DataModem


    donnaille wrote: »
    I know this is a simplified example, and I'm not fully aware of the Irish system having been abroad a number of years but I'd hazard a guess that you would need to wait 28/30? days between selling and buying to avoid falling foul of 'bed & breakfasting' rules.

    Not sure what the rules are but that sounds like it makes sense.


  • Advertisement
  • Registered Users Posts: 226 ✭✭ donnaille


    3DataModem wrote: »
    Not sure what the rules are but that sounds like it makes sense.

    Apologies, I'd misread your post first time around, so it's not relevant to the example you posted in any case.


  • Registered Users Posts: 1,256 ✭✭✭ JackieChang


    3DataModem wrote: »
    As above posters, here's a simple worked example.

    Let's say hypothetically you purchased 10k shares at 1 euro each, and they are now worth 2 euro each i.e. 20k, and they never go up again.

    2020: Sell 3,720 worth (1,860 shares), profit is 1,240, zero tax due - you have 3,720 in cash and 16,280 worth of shares
    2021: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 7,440 worth of shares: you have 20k worth of shares
    2022: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2023: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2024: sell 3,720 worth (1,860 shares), profit 1,240, zero tax due, buy 3,720 worth of shares: you have 20k worth of shares
    2025: sell 1,400 worth (700 shares), profit 462, zero tax due, buy 1,400 worth of shares: you have 20k worth of shares

    You end up with 20k worth of shares.

    The purchase price for ALL the shares is deemed to be 2 euro (you don't have any 1 euro shares left), so if you sell them you pay no tax.

    Of course, share prices are not that simple.

    Why sell exactly 3,720 worth of shares?


  • Registered Users Posts: 2,700 ✭✭✭ cronos


    Why sell exactly 3,720 worth of shares?

    You need to sell this year and declare it before October 31st of next year.


  • Registered Users Posts: 1,256 ✭✭✭ JackieChang


    cronos wrote: »
    You need to sell this year and declare it before October 31st of next year.

    Yes but why exactly €3,720 worth? What's the maths behind this? I thought you just need to sell enough to get €1,240.

    If the shares are worth €2 each, sell 620 shares and you have your tax free €1,240.

    You're selling 1,860 shares to get €3,720. Why?


  • Registered Users Posts: 11,386 ✭✭✭✭ Timmaay


    The other cgt rules to be careful of, you can use losses to offset gains, but not if you buy back that same share within 28days, also efts bonds etc are treated alot differently to shares and usually are liable to dirt or income tax rather than cgt. Whole thing is abit of a mindfield and everyone should definitely do their homework before they buy and sell.


  • Advertisement
  • Registered Users Posts: 3,689 ✭✭✭ 3DataModem


    Yes but why exactly €3,720 worth? What's the maths behind this? I thought you just need to sell enough to get €1,240.

    If the shares are worth €2 each, sell 620 shares and you have your tax free €1,240.

    You're selling 1,860 shares to get €3,720. Why?

    You are taxed on the profit, not the amount realised from sales.


Advertisement