Will this reduce my Capital Gains Tax?
Hello im 22 years old and I have recently got into the stock market and got lucky and made myself a whopping 100k its in my trading account and not my bank account.
If I was to withdraw it all at once i would end up paying around 15 - 20k in tax what i think is over the top. Why should we give money to a goverment that classes its citizens as second class and give free hand outs to people who arrive on rafts.
My dad works in a bank and he said if im smart and I only withdraw 20k at a time spaced out over the year or two i will end up playing alot less in tax?
He said I could declare the first 20k then put 1k back into the trading account then withdraw the other 20k later on down the line and say i made it with the 1k i put in.
This would reduce my tax bill by a huge sum, is there a better way to do it or any other ways? :)
I'm From the UK
- Anonymous2 months agoFavourite answer
You should talk to a tax accountant regarding the specifics.
- 1 month ago
he reduced period of the aforementioned 24 months is not applicable to movable property such as jewellery, debt-oriented mutual funds etc.
Gains received on a sale of capital assets are termed as capital gains. Depending on the holding period of assets, such gains can either be long-term capital gains or short-term capital gains.Gains earned through the sale of assets are placed under ‘income’ in a balance sheet. These earnings are liable for taxation. Long-term gains and short-term gains are however taxed differently.-https://rplg.co/a1951400
- 1 month ago
Not sure about the UK but many tax laws are similar to the US.
When you buy or sell a stock or other holding within your investment account, that is when the REALIZED gain/loss occurred. When there is a realized gain/loss, then there is a taxable event. When there's a taxable event, then there is a tax due/credit for the tax year in which it was realized.
So, it doesn't matter if the money leaves the investment account or not. If you sell your position with a 100k gain (great job by the way!) and keep the money in the account just to move it into other positions, you still had a realized gain in this instance. The TOTAL tax is due when you file that year's tax return.
Word of advice: if you get lucky, use it wisely! Over the many years as a financial and legal consultant, I've seen many people, especially young ones, squander their fortunate occurrences believing that they will continue replicating them. Take the gains and purchase things that have less upside potential and higher floors. If you purchase a mutual fund that averages 10% a year, that 100k will double every 7-8 years. That means it'll be millions by the time retirement comes around. 4,525,925.56 when you are 62 to be exact. Just over 3,600,000 after you withdraw the taxes due for 2020 and invest the 80,000. Not bad for no work, right?
- Girlie ElectricsLv 71 month ago
Plenty of ways you could have avoided taxation. Like investing within an ISA. Don't think the taxman can't see when the profit from sales occured.
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- roderick_youngLv 71 month ago
I don't know how UK tax law works, but it sounds like you have 100k of unrealized gains in your trading account. If your father is a banker, then trust his advice on tax matters. Don't ask here.
- AmyLv 72 months ago
None of your question made any sense.
If you made 100k capital gain, then you owe tax on it. Moving cash from your trading account to your savings account does not affect your tax bill.
Now, if you own stock whose latest trade was at $100k, then you don't yet have a capital gain; you have stock that is theoretically worth $100k. Capital gain means profit, the difference between the price you bought and sold at; there's no gain until you sell.
In this case you could indeed sell only some of your shares in order to only receive some of your gain this year. But there's no guarantee that the remaining shares will still be worth this much next year.
$100k capital gain means e.g. you bought bought stock at $20k that went up to $120k. Not bought at $80k and it went to $100k, and not you made $100k on one trade and lost $100k on another trade.
Tax is based on your total income for the calendar year. Spacing out your stock sales over the remaining months of 2020 is no different from selling it all now or selling it all on December 31.
If you were able to gamble enough cash to make $100k profit from the stock market, on top of your $50k or more of earned income, then you can afford to pay $15k tax.
- kswck2Lv 72 months ago
It has already been reported to the tax authorities. So you will be paying taxes on it no matter what.
- No MercyLv 72 months ago
15 to 20 k on 100 k capital gain tax? that is low. where I live it is 30% and they will take it automatically whether u want it or not. be glad u live where taxes are so low
- car253Lv 72 months ago
You are complaining about giving "free hand outs"?? You have no sympathy for poor.
- GA41Lv 72 months ago
If you sold the stock, and it is in a brokerage account, you will have to pay income tax on the entire $100K. It doesn't matter when you withdraw it, the income must be reported in this tax year. To get the capital gains benefit, you would have had to hold the stock for 1 year before you sold it. Sorry. But look at it this way. You still get to keep the after tax money. Just be very sure you put aside enough money to cover the taxes. Some people spend all the money, then find out they have to come up with $20,000 to pay the taxes.