The Hunt budget changes Ermine plans slightly

…but not too much.

Jezza tells us we will all pay more tax. Fixing the value of the personal allowance in a 10% inflation environment naturally means you get to pay more income tax year by year, if your income is above 12.5k which mine is. However, the hazard and arguably the opportunity for Ermine action lies in a different area. I regard the current dire straits of the UK economy partly Putin, but the particularly worse performance relative to our peers is a Brexit phenomenon, now Covid is no longer covering it. And I didn’t vote for Brexit, so if this screws the economy, well, Brexitards, you voted for it, you own it. I don’t feel a moral obligation to help dig you out of the shit, and if you voted for Brexit and feel skint, well, don’t say people didn’t tell you it’d cost you.

According Jacob Rees-Mogg it’ll take 50 years to see the economic benefits of Brexit, and I don’t think that many 20-year-olds voted for it, so hopefully most Brexitards were big on sovereignty, because they’ll be long gone before they see the economic sunlit uplands. I don’t have an issue with people who thought it was a price worth paying for sovereignty – freedom always comes at a cost, and presumably you are rich enough to carry the Brexit malus on GDP, which is part of the fiscal hole Jezza wantes to fill.

Income tax changes

I am probably never going to be a higher rate taxpayer. Well, until Jeremy Corbyn comes into power. While over the 12500 level I am far enough off the 50k income mark to feel safe from higher rate tax for a while. I never earned enough to be endangerered by the additional rate, so if that’s you then while I hear your pain, it’s not my problem. I would suggest you research  salary sacrifice if you can, and if you are already over the pension LTA then your are rich enough to afford professional advice, as well as caviar and champagne.

I’m not even that exercised about fiscal drag on the thresholds, because I am old enough to remember that Mrs Thatcher took a much higher tax take out of a much higher proportion, about 2/3 ISTR of the younger Ermine’s pay packets at the start of my working life. The current personal allowance is still quite high, historically. You lot don’t know you were born. OTOH there’s some argument to say that government services worked better back then, you don’t get ‘owt for n’owt.

I struggled to find any useful information on the tax changes as they apply to me, because most of these are in the dividend and CGT arena. Most media don’t talk about that, because the vast majority of their audience presumably don’t have that sort of income/assets. Let’s face it, if you are investing up to 20k a year your shouldn’t have that sort of assets either, as Monevator keeps on telling you. Use your ISA allowances, as you were. I have not picked up any signal about changing the ISA threshold, so aim to fill your boots in the next couple of years, I could see that regime getting tougher with a change in government.

 

whatcha lookin’ at, punk?

Due to the dearth of information about my oddball bias I am going on this Which summary. I didn’t listen to the budget since while it’s within my circle of concern it’s not within my circle of influence, a walk in the countryside snatched between the showers seemed to be a more constructive use of my time. I saw this bad boy perched on some rugby poles. Indeed I spent so much time watching him I pissed him off so much that he turned his back on me.

I pointedly ignore watching mustelids…

before he dive-bombed something in the pitch.

something got it, there

Or I could have spent an hour watching this old buzzard instead

I was taking the line that a walk round a buzzard-filled countryside was doing a teeny bit for keeping my sorry ass out of the way of the NHS, because it seems to be needed for keeping the young’uns noses at the grindstone, and the buzzard on the telly was going to do what he was going to do anyway.

Dividend tax changes and capital gains tax changes.

They’re coming for your rentier earnings, capitalists. The amount of dividend you can earn tax-free drops from £2000 this TYE2023 to £1000 TYE2024 and £500TYE2025. The latter is likely to be irrelevant since I don’t think the Tories will be in power. You won’t have ANY tax-free dividend allowance in two years, at a guess. Note that at this stage you pay a lower rate of tax on dividends over the tax threshold than you do on earned income, 10 8.75% for shares as opposed to 20/32% on earned income. I would not bet on that persisting after two years.

This pretty much wipes out my plan to pay for the increase in power bills through dividends held in my GIA (so outside the ISA). I may pause my Vanguard ISA next year and reactivate my iWeb ISA, I hold the GIA with iWeb (which is terrible from a FCA compensation angle) so  I will see what they can do about Bed and ISA transfers, from memory they only charge you one side of buy/sell transactions. I have time to boot these dividend payers into the ISA, or sell them out.

Capital Gains tax

The allowance here falls in future, first to 6k TYE2024 then 3k TYE2025 Curiously that makes the carry over of some CGT losses I have more valuable; while you can’t carry allowances forward you can carry the losses. CGT is generally a fight you can choose the time of battle. Not always, some corporate actions trigger CGT gains or losses.  Obviously you don’t aim to make a CGT loss, in the event say that I observe a gain is my holdings of Invesco  SGLP gold I will sell them and buy Ishares SGLN (first checking Invesco isn’t owned by Blackrock or the other way round. I would need to qualify the cost of the turn and spread, natch. This would circumvent the 30-day rule – same underlying asset, different ETF share instrument. Like dividend tax, a basic rate taxpeyer pays a lower 10% rate of tax on shares CGT over the threshold. Again, I would not assume that applies after two years.

In the big picture, my GIA will end up full of SGLP and SGLN and I will move income assets into the ISA over the next couple of years. I will move all gold holdings out of my ISA, probably swapping this for more VWRL and index funds. I will probably clear down most of my Vanguard ISA into the Hargreaves Lansdown ISA, to kill off percentage fees (I am at the HL cap on shares, I hold no funds).

So yeah, at the edges I will be one of those paying more tax. But not too much more. Because unlike people who get most of their income by selling their time or skills for money I am on the side of capital, and capital always has more choices than Income. Since I didn’t vote for Brexit, I feel no particular moral obligation to compensate for the 4% loss in GDP. I also think it would be only A Very Good Thing if the OBR’s 10% house price fall forecast comes true. Houses are far too dear in the UK as it is. Rather than pissing around trying to facilitate people to be able to afford to pay more, the best way to make anything more affordable is to reduce the price of it. Flushing out BTL landlords are all the other good folk that try to invest in houses rather than to live in the buggers could also work wonders, though we could do well to remember that many people are just too poor to be able to buy houses.

Note that this is relatively short and ill thought out because its’ only been two hours since the buzzard on the telly has stopped talking. E&OE particularly on that single-sourced piece on the changes in CGT and dividend tax, and the ISA allowance being the same.

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60 thoughts on “The Hunt budget changes Ermine plans slightly”

  1. Thanks for thinking and posting.
    My observation is that the tax burden falls on income and less on assets.
    It’s not right or fair but it’s what we have.

    The ISA allowance at £20,000 a year allows you to avoid tax on what, £800 year or so in dividends?
    (Yet only a fraction of the population holds ISAs and even less have any substantial amount invested).

    The UK is still a low tax, low quality country,. albeit with massive house prices (and rising interest rates in a time when you can’t eat out on equity).

    For me and my family, it was much better than expected. I suspect that I’ll open JISAs for the kids as a way to avoid the extra tax on dividends.
    Thanks

    Liked by 1 person

    1. > My observation is that the tax burden falls on income and less on assets.

      That’s about it. Though Krazy Kwasy et al were of some detriment to house prices, though I’d say the Fed is the 900lb gorilla there. And you don’t fight the Fed.

      Personally, I don’t see a 10% fall in house prices as A Bad Thing. TBH a 50% fall would not be A Bad Thing IMO, but then housing equity is not the dominant part of my networth so I probably have an odd outlook on that for an old git w/o mortgage. I don’t really see what’s so terrible about starter homes being on a wage multiple of 3.5 to 4 x gross and interest rates about 6%, typical of the historical run rate for the UK. But that’s not what’s on offer here.

      The runes are clear enough on the direction of travel, though. I want to off that GIA in the longer run, and hold gold in it in the short term. I have managed to avoid drawing an income from the ISA up to now, but it will happen sometime.

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      1. > … and hold gold in it in the short term
        any particular reason you favour gold in the GIA?

        > I have managed to avoid drawing an income from the ISA up to now, but it will happen sometime
        why so sure, e.g. will your fully indexed SP [to date] not come to your possible rescue?

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      2. > any particular reason you favour gold in the GIA?

        It pays no income. It is a long-term store of wealth, subject to the considerations Jam made about total system failure. There are at least two ETFs that track the asset class (SGLP and SGLN, I am sure there are more). Initial thoughts are that with the minimal future CGT allowances I will want to flap between these possibly annually, to forestall accruing capital gains over time. I don’t expect gold to do anything more for me other than roughly stay the same sort of value when I come back for it, but I don’t want to pay tax on it. Productive assets in the ISA gives me the option to accrue income. So far I haven’t withdrawn it, merely accumulate/reinvested.

        > why so sure, e.g. will your fully indexed SP [to date] not come to your possible rescue?

        I’m not sure at all. If there’s one thing that I learned since quitting 10 years ago, it is that not plan survives contact with the enemy. As M Scott Peck said in one of his books, getting older is also a process of letting go of things, and certainty is one of them.

        There are a few years to getting the SP still, and I am still in decent health. I want the optionality. Agruably when I get the SP this will be even more important, as there is a trend towards dropping the HRT threshold in the medium term. Though I am less than a decade from getting it, I am not really that sure it will happen. So many people will be destitute in Britian’s future, the siren call of means testing may be too great.

        More widely, there’s lobster, power and travel to pay for, the aim is to live well. When I started the journey lean FIRE was about all I could see ahead, but as I get older and more tuned to the finer things in life, the kindness of the markets has pushed me more towards portlyFIRE. I am not sure I am in the league of fatFIRE, that’s for the likes of ZX or FvL. Nevertheless, the optionality of a source of tax-free income that can roll-up to CGT-free accumulation is of great value.

        Against that, Jam’s PEP->ISA and future tax changes are a serious political hazard. My ISA estate is now roughly the same as the capital backing my DB pension computed in the HMRC way. That is due to being active and lucky, not passive. But the Overton window is clearly shifting, and people will have a much greater sympathy for people who have DC pensions than those who have ISA amounts of the sort that would make a respectable SIPP. So I need to think about options if the Brexit malus trains tax-raising sights on my choice to favour an ISA.

        If that Overton window shifts more and more then I will consider overspending rather than paying the Brexit moron tax. I could probably buy EU citizenship now, and I have in principle a theoretical right to German citizenship by ancestry, though it seems hard to press the case at the mo. Paying for German lawyers is probably cheaper than paying Portugal on the open market, and ancestry is inalienable, whereas straight purchased citizenship is still conditiaonal, as us Brits found out with Brexit and Russians found out more recently. Brexitards can f*ck themselves as far as mustelids being taxed shitless to bail out of their project. You bent it, guys, you mend it. I observe the IFS says

        The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous that it might have been by a series of economic own goals. Mr Hunt appears to have recognised this. After years of cakeism, his colleagues, the opposition, and we the voters need to take that fact on board too.

        Obviously experts, schmeperts, Govey is sick of them. I probably can’t avoid paying more tax to some government at a later stage, but I’d like to get something for it, and I don’t see that happening in the UK the way we are going. A health service that works and basic competence in the services rather than the privatised market knows best claptrap we have now would be a start. Hell, the government services of the UK in 1980s weren’t that bad.

        The UK does have many great advantages, being an island may be of value in hard times to come and it has reasonably serviceable institutions, though they were built by giants and now run by pygmies. People need to lose their faith in cakeism and Brexit. We don’t have to rejoin the EU, but we need to learn how to talk to it civilly, cooperate with the EU in some areas of common interest due to sharing the same general geographical space and damn well strike an adequate deal to buy and sell stuff to it. Hard Brexity dreams are none of those things.

        It’s a long and winding road ahead. Optionality is good; it’s worth paying for.

        Liked by 2 people

  2. Overall a budget that is basically neutral for me. I don’t really do dividends or CGT since most of my wealth is in offshore funds, ISA or pensions. The fiscal drag from freezing income tax thresholds and the move lower in the additional rate adds a rounding error to my tax bill. If the weight was meant to fall on the broadest shoulders then I’m not feeling it.

    So it’s pretty much business as usual for the UK. Those Brexiteers can continue to revel in our exceptionalism. Exceptionalism in the processs of managed decline that is!

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  3. Did he say anything on the £1000 tax free allowance on interest earned on savings for 20% taxpayers-£500 for 40% tax payers ?
    c
    xxd09

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      1. Thin consolation though – assume you get £1000 return at say 5% on £20k, that means another £1000 of purchasing power fell off the back of a lorry in the same year at a 10% inflation rate 😦

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  4. Couple of things not mentioned that will likely cost you are:
    a) council’s will be able to increase council tax by 5% without holding a local referendum (currently it is 3% IIRC)
    b) Household energy price cap extended for one year beyond April but made less generous, with typical bills capped at £3,000 a year instead of £2,500

    And IMO this is worth a read too:
    https://www.bbc.co.uk/news/business-63659936

    Liked by 1 person

    1. > councils will be able to increase council tax by 5% without holding a local referendum (currently it is 3% IIRC)

      True, but with inflation of 10% that is not increasing at the rate of other stuff I buy even then.

      I am not saying I am immune from all adverse effects here. But as a goose I was not particularly more plucked that I am aware of. At the moment the focus is on filling ISAs while they are still good, a fall in the ISA allowance or a LTA there would be a problem for me.

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  5. A couple of small corrections on your excellent commentary of today’s events. According to the BBC news app, now checked in the Autumn Statement document on gov.uk, the reduction in CGT Annual Exempt Amount to £6000 starts in April 2023 – not 2024. It will be down to £3000 in 2024.

    Also, the current tax rate on dividends for basic rate taxpayers is currently 8.75% – not 10%. I cannot find any reference to a change in this, so assume it will continue into the next tax year.

    Liked by 1 person

    1. I can see my terminology in confusing

      > first to 6k TYE2024 then 3k TYE2025

      but the tax-year end 2024 is in fact the one starting 2023. I pinched the TYE from some finacial site, but perhaps it’s not widely known. And I take the point that to get it right TYE 2024 you need to know about it through 2023-2024 😉

      But you’re absolutely right on the dividend tax for BRT at 8.75%, I confuzzled that with CGT at 10% for that group, my bad

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      1. Yes, my fault – I had noticed your use of TYE in your last post comments and worked out the meaning. But somehow I was lured into interpreting it as ‘tax year beginning’ this time by the discussion of the halving of tax-free dividend allowance being implied as soon, but CGT allowance as falling in the future. If I had read more carefully I would have realised that your dates were correct.

        I still have some money in a GIA from PCLS and an inheritance. I was lucky to make some good gains early on in global equities, so I have been trying to defuse my GCT over the last few years by using the allowance to switch between similar funds or sell off to fund my ISA. I think with what I have left I should be able to cope with the new CGT allowance next year without slowing down my progress in getting the money into my ISA.

        Liked by 1 person

  6. Our situation is irreversible decline with the only significant variable being the rate. The UK survives financially at the moment by selling off licences to extract rent from its people and land, but as more state or commonwealth is sold off, (mainly to outsiders as impoverishment means fewer citizens can compete) wealth is extracted and mostly not reinvested.

    This is a colonial economy with diminishing returns, so that the country gets trapped in a negative spiral like a poor country, powerless to escape exploitation by others. If you sell off your water companies for example, the foreign buyers can charge as high a price as they can get away with, (as energy companies are helpfully demonstrating with their fantastical profits) reinvest as little as possible in infrastructure, repatriate profits and leave the people living in a sewage environment.

    When buyers of the national debt work out the UK increasingly won’t earn enough to cover much more than the interest, they will demand higher profits, increasing the problem of solvency. If money is printed to cover the shortfall, foreigners wont accept it as payment for the goods they produce, they will sell them to those with valuable currency. The way out of this pain starts with good governance and that looks impossible now.

    Liked by 2 people

  7. That change to CGT is really annoying. You could ship 20k into an ISA from pretty much anywhere with a 12k allowance. Thats going to be more difficult on 6k and then 3k. Could have done without that one…

    Liked by 1 person

    1. yeah, that is the one I find worst of the lot strategically. I have a lot of VWRL outside the ISA as well as gold, may have to bounce that against Ishares MSCI ACWI to harvest any cap gains in a year to stop them rolling up. I will certainly do that with gold this year to neutralise that gain, unless of course the pound takes off…

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  8. I will be a little worse off, but not too much.

    I have a large undiffused potential capital gain (A nice problem to have I know), because when working and accumulating, I didn’t diffuse my capital gains as I went along for the first two thirds of my working life. I did in the last few years, but it only since Fire-ing that I have really used up the £12,300 CGT allowance to almost the maximum. Doing that worked well, since £12,300 of gains would normally be more than £20,000 sold.

    So the £20,000 went into my ISA and the rest into global tracker fund that I am happy to hold forever. (I like Warren Buffet’s idea of his preferred holding period being ‘forever’).

    Going forward, I might only be able to sell, say, £10,000 before I hit the £6,00o CGT threshold and then, say, sell £5,000 before I hit the £3,000 CGT threshold the following year.

    So the full £20,000 to go into my ISA for the next two years is going to have to come partly from some other source. That was my initial take.

    Dividends only being taxed at 8.75% is not too painful.

    Realising losses, to help offset gains elsewhere, by switching between SGLP and SGLN sounds like a good strategy to me. Although, I feel generally a little depressed by the state of the world and the brexit wound (a bit like @FI sounds), so may get a safe deposit box and save some gold Britannias tax free, in case of a real SHTF scenario.

    One other thing, back when labour came to power in 1997, Gordon Brown, the then Chancellor, floated the idea that only £50,000 from PEP’s (Personal Equity Plans, the fore-runner to ISA’s) could be carried forward from PEP’s into ISA’s. I remember that well, since I had about £55,000 in my PEP at the time, so breathed a small sigh of relief.
    I am well into 6 figures now in my ISA now and I doubt there would be much to stop a new labour government and chancellor saying something like you could only carry £50k , or £100k, into their new ‘Small Tax Saver’ account, or whatever they will call the successor to ISA’s.
    It would be a much bigger problem for us FIRE types and I doubt the general public would have much sympathy us. We would be a soft target. Now that is something to worry about.

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    1. > Realising losses, to help offset gains elsewhere

      I’m not looking to harvest a loss on SGLP 😉 Indeed, arguably there a case at the moment to leave your losses be, and harvest gains, every pissly one of them, this TYE 2023 to get as much of your 12k CGT used. You can take losses into the new regime in a couple of years, and who knows, the assets may come good. I don’t currently have any unwrapped stinkers, but I’d sit on ’em if I did (all other things being equal, if I felt they were still rotting I’d take the loss

      > I am well into 6 figures now in my ISA now and I doubt there would be much to stop a new labour government and chancellor saying something like you could only carry £50k , or £100k, into their new

      That would paste me too 😦

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      1. FWIW I think Al Cam meant this comment by ZXSpectrum48k:

        While ISAs are clearly vulnerable, killing them completely only would save around £2-3bn/annum. Meanwhile, tax benefits from pensions (to both employers and employees) cost over £40bn/annum. Pensions are just so much more juicy to play with.[…]

        I hadn’t realised there’s an order of magnitude difference of the tax revenue loss. They’ll piss off about 12 million ISA holders.

        In less good news, if you look at the stats on individual holdings amounts, and I would say that FIRE-tards are going to think that this scale is missing space on the right-hand side

        Chart 4 in this https://www.gov.uk/government/statistics/annual-savings-statistics-2022/commentary-for-annual-savings-statistics-june-2022

        It’s interesting, though perhaps not surprising, that ISAs are a basic rate tax thang, presumably HRT/ART payers focus on pensions due to the relatively greater tax benefit

        and if we rescale Gordon Brown’s £50k by inflation that’s £90k now, let’s say £100k in two years. You can’t live or die on that sort of amount for FIRE-planning if you use it instead of a pension, though perhaps it is useful between the gap of stopping work and 55/whenever you get to draw a SIPP

        And I still think DC pensions have a lot more of the sympathy vote…

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      2. @Ermine:
        Thanks. That is exactly the ZX comment I meant.
        I remember the ISA stats you pointed to too.

        Whilst I agree DC pensions at BR have “more of the sympathy vote” the optics of removing the HR/AR benefit from DC’s may ultimately be very tempting to the exchequer – after all, they have the “broadest shoulders”, etc, etc.

        So, as ZX said:
        “ISAs are clearly vulnerable”
        but
        “Pensions are just so much more juicy to play with”.

        And as you said: “Optionality is good; it’s worth paying for”
        Have you considered physical gold?

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      3. > And as you said: “Optionality is good; it’s worth paying for”
        Have you considered physical gold?

        It’s always a struggle. After all, it’s taken 10 years of lowish inflation since this post for me to start booting gold out of my ISA into the GIA. I do still have that piece of physical gold, it was given to me by my grandfather, and a few sovs that people have given me over the years. So perhaps gold still has this unique aspect of holding its value by what it is, the ultimate bearer instrument. But bearer instruments come with their own problems, too. In the same was as the decentralised aspects of crypto failed through bad actors, bearer instruments attract the Ronnie Biggs of this world. OTOH bearer instruments are immune to government diktat, provided you were prepared to wait 41 years or sneak it abroad in your socks.

        Dunno at this stage, though certainly worth pondering on more given the direction of travel

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      4. I always find this useful to get a quick look at what various tax reliefs actually cost the government

        https://www.gov.uk/government/statistics/minor-tax-expenditures-and-structural-reliefs/estimated-cost-of-tax-reliefs-statistics#headline-statistics

        ISAs at £3bn. Pensions (for employess) at £22bn and for employers at £20bn.

        Given enough time the lost tax due to ISAs will inflate. For a number of years the amount subscribed was relatively low and about 40% of tha is in cash ISAs at pretty much 0% for the last decade.

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      5. > in cash ISAs at pretty much 0% for the last decade.

        The roughly 50% in cash ISAs make you want to weep, eg

        > In 2020 to 2021, £1 billion was subscribed to Junior ISAs, around 57% of which was in cash.

        I mean FFS people, you got about 18 years from the get-go. In Cash. If they’re that fearful of the markets then lifestyle it out, or hell, use a Vanguard target retirement 2040 fund if they really CBA.

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      6. It has always been hard to get people to invest their money/savings productively. After all it is risky, and IMO people like Martin Lewis do not really help. The classic carrot has always been some form of tax relief. So, IMO, there is a lot more at stake than just raising some more money to pay for cakeism/entitlement or whatever it is now called.

        WRT physical gold – have you considered purchasing Mrs E, or indeed yourself, some nice jewellery at auction?

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      7. > or indeed yourself, some nice jewellery at auction?

        I spent too much time watching the A team in my 20s 😉

        The cost of the turn is bad enough on physical gold as it is, without the assaying problem on jewellery. Following the physical gold up I am clearly a tyro, since I had never heard of Britannias.

        I am slowly warming to the idea of moving perhaps a quarter of my gold holdings out of paper.

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      8. Yup, retail via jewellers is very bad vfm.
        However, auction houses have to operate between that extreme and scrappers – for want of a better word. They [auctioneers] seem to be trying to get a hammer price of at least the scrap value (to keep the seller basically happy) and there is always the possibility that the item sells at auction for much more. Thus, occasionally your additional cost as a buyer comes down to the buyer fee – which is not insignificant, but far less than retail mark ups. And, if it is a piece that you/the OH really like, well what price can you put on that ….

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  9. Does anyone know if there is a time limit on offsetting capital losses against capital gains? The last time I searched for this information I found no mention of a limit. I cling on to a 2013 HMRC letter confirming they have recorded a ~£2k loss for me.

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    1. At the moment (!) you can roll forwards as long as you want. This thread, for instance

      You have a choice when to crystallise losses and when to crystallise gains. At the moment I am thinking keep rolling forward losses – I have £11k carried forward, and TaxCalc is good enough to remind me of this. Provided you have gains within any years limit, and you can use the trick of selling one etf and buying another in the same underlying asset. Logic points me towards either only taking gains (up to the annual limit) or taking no gains and just losses. You can accumulate losses but not annual allowances, but if you offset a loss in one TY against a gain in that TY, you lose the optionality of rolling the loss forward. You must do that if both happen in the same year
      So don’t do that, if you can help it, either or. If you have no significant loss in one TY, then just flush everything up to that CGT amount. I will probably sell a load of stuff with a capgain towards the end of this TY to consume this year’s allowance, roll the loss forward. The other implication is crystallise losses towards the end of the TY, to preserve optionality of using that year’s allowance. That of course only works if you are swapping between ETFs. If you eat a corporate event like a share buyback* or a company going titsup, you don’t get a say as to when you eat the loss.

      * I have no idea of what share splits and buybacks mean with CGT. Which points towards don’t hold individual companies in a GIA for me

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      1. Thanks for that. I’ll guard that letter carefully! I’ve already been doing a lot of what you suggest, selling up to the CGT allowance each year from an HSBC FTSE All-Word Tracker and buying into a near-equivalent Vanguard Global Tracker. I’ve now completely sold off the HSBC fund this year and haven’t bought any more of the Vanguard fund. I have a little bit of my CGT allowance left this year, so I will sell some of the Vanguard before the year end to use up the allowance. I think the remaining apportioned gain on the Vanguard will be under the £6k allowance next year, so I won’t have to rely on that letter. I’m not buying into funds in my GIA any more and I’m keeping the sale proceeds in cash. What’s not needed to fund my ISA can stay as part of a cash allocation now that interest rates are a little better.

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      2. > Which points towards don’t hold individual companies in a GIA for me

        Maybe, but….
        a few months back, I had an interesting chat about just this point [share buyback, etc] with naeclue and how it impacts distributing funds/ETF’s/etc. IIRC he agreed that such corporate actions can lead to higher income payments from distributing funds. And, I assume, are just absorbed into ‘gains’ in the Accumulation version. If I can find the subject chatter I will post a link.

        BTW, HMG Autumn Statement paperwork confirms class II/III voluntary NI contribution rates will also increase by 10.1%.

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      3. > And, I assume, are just absorbed into ‘gains’ in the Accumulation version

        No, no, no, no. For the love of all that is holy, NEVER hold acc units unwrapped

        this is why

        You’re more of a details guy than me. But remember, you are only given 2000 weeks on earth. I suggest that spending time on that sort of detail is a misallocation of capital, of the time variety. Life is just too short.

        > confirms class II/III voluntary NI contribution rates will also increase by 10.1%.

        Hmm, are you going to backdate by a year. Or let it go and suck up the £20 hit, on the grounds life is short, see above 😉

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      4. I totally agree re not holding acc units in GIA!

        Re the details: what caught my eye originally was the, IMO, unusually high June dividend from VWRL!

        No backdating and probably Class III in due course – for a variety of reasons not entirely unrelated to not wanting to ‘poke the bear with a stick’.

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      5. > probably Class III in due course

        Now that I believe you can usefully backdate, ie buy up to two old years, I think at the then prevailing rate

        > Re the details: what caught my eye originally was the, IMO, unusually high June dividend from VWRL!

        While I didn’t spot it at the time, yes, I see what you mean. Does that imply that my expected valuation of VWRL needs to change? I have been thinking £85 is still a bit stiff for something that’s meant to have the bejesus hammered out of it (US shares), but if each represents more of the underlying asset. It’s hard to see straight with the falling pound, as well. I’ve looked back and haven’t seen any units appearing/disappearing, Though I kick my younger self for his purchase at £64 on the 28 April 2020 for not going bigger, before recalling what was going on at the time 🙂 Nevertheless I didn’t pay more than £71 in the rest of 2020. But if something has happened to rescale the base value other than the falling £, maybe I can feel more chipper about £85

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      6. As it happens, I could buy 21/22 and 20/21 a touch cheaper than the prevailing rate (Class III) until 5 April 2024/23 respectively. 20/21 being the cheaper of the two – at £15.30 / week. Oddly (to my eyes anyway) even earlier years 19/20, etc cost the prevailing rate and are only valid until 5 April 2023.

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  10. This will hit me hard as I have a lot of shares to sell which now means I will not be able to sell in such big chunks as I was using the CGT limits. To sell down and either live off it or put into my isa.

    I am also worried about the BTL as I am trying to sell it this year before the CGT changes so I pay less tax on any profit… the way things are going I will have a larger tax bill for asset disposal which should have been reasonable tax and give me some money to live FI for a few years.

    This ruins my plan although I will just have to take the hit as I was trying to get out of BTL anyhow this year. The property may sell quickly or not, if it hangs around for months due to lack of buyers I will be seriously out of pocket and having to find work to enable me live.

    Bang goes my FI plans as being forced back to work due to lack of funds will be a nightmare. Especially as no one will want to employ a 50yr old who has not worked for 4 yrs. unemployment has as yet to start going up but it will very soon.

    Liked by 1 person

  11. What is outrageous is that there is no return to indexation when calculating gains – the CGT allowance was Gordon Brown’s sop for removing this originally. I face a tax bill on any gain over 0.3% compound annual growth on a property I’ve owned for 27 years, yet could pay nothing on a 300% gain from day trading.

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  12. @Jam, well we’re in good company feeling maudlin about the situation, the Monevator is singing the same tune unsurprisingly, given the trendline and state of the variables that determine it.

    I would say it’s not unreasonable to be frustrated that you needlessly have to pay for a slew of new taxes you didn’t vote for or otherwise cause the need for. (brexit cretin-tax, austerity, crony contracts, white elephant projects, take your pick)

    Then you look to the horizon for any hope and see no break in the stormclouds, only endless mouthbreathers and criminals to rule us all. At gunpoint the one positive I can come up with is that finally the boomers numbers have been matched by the next 2 generations able to vote, so maybe we are at the crossover on the graph whereby a new set of pigs oust those at the trough and they leave us enough to survive on. Because the way I see it, there are very few ways left of getting a real return on investments and without that you don’t have a capitalist economy as it’ll be safer to sit on any savings. Deregulation, renteerism and gatekeeping have enabled the cancer of corruption to eat out the real economy, killing innovation and resulting in the ‘mysterious’ productivity crisis.

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  13. Thanks for the summary. I listened to news of the budget on the radio but they didn’t highlight the nuances like CGT and dividend income tax. I think these are my main problem, it’s mostly VLS60 income units in the GIA and some VHYL so not a huge CGT exposure on those to worry about thanks to recent events! A good thing as I seem to remember calculating CGT on funds bought at different prices over time is a pain in the neck if you’re selling a £20k block of a fund investment and the gain might be over the allowance. Maybe I should swap my whole VLS60 allocation to some other VLS flavour while I’m ahead of the game with CGT liability, fire some of the bonds in there that didn’t do their job…

    My main problem with CGT will be a property to offload due to accidents of life (not a bad problem to have…). I need to read up on whether there’s still money off for it being a main residence for a period of time, I thought that might have been something they’d use to claw some more money out of the disgruntled landlords.

    The idea of hoarding some gold in a GIA sounds interesting but maybe I missed the boat on that now looking at charts? The worst thing I held in my GIA for working out the tax return was REITs, moved all those buggers into the ISA!

    Good spot on the Buzzard, the ones perching around here always fly off by the time I get into useful photographic range!

    Liked by 1 person

    1. > maybe I missed the boat on that now looking at charts?

      yeah, the majority of mine was I was getting a bad feeling about the Brexit pied piper in 2016. I am selling out of the ISA to buy productive assets and rebuying in the GIA to keep the gold there, so I crystallise the profit in the ISA and expose myself to the tail risk in the GIA now. I wouldn’t start on that now from the get go. Some of that capital in the ISA was the ancient sunlight of my earnigns before the 52% decided to devalue the currency to feel they socked it to The Man|eliete|experts they’d had enough of

      > the ones perching around here always fly off by the time I get into useful photographic range!

      I’m terrible on hawks. I went for buzzard because they’re in the area, I can hear ’em, though birds of prey are not mellifluous callers and mroe or less all sound the same, and if it’s a hawk it’s likely to be a buzzard. The RSPB had me wondering, because my buzzard has a rather pale belly. I use a powershot zoom because while it’s overpriced for what it is, which is basically a mobile phone camera with some optical stabilisation so the image quality always stinks, it does get record shots with a minimum of fuss.

      So I was a lot further away from this fellow than it looks, I wasn’t on the rugby pitch at all!

      For some reason they seem to be getting bolder here, and much communication between pairs. Not sure what’s going on with that, it’s hardly a good time for breeding!

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      1. I think there’s a fair bit of variation in Buzzard colouration to be fair. The ones here are mainly pale up top looking like they’re wearing Icelandic jumpers if you know what I mean. The PowerShot looks handy. I often carry a m43 mirrorless camera with 300mm lens around, it’s light but not exactly pocketable!

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  14. @Ermine
    “No, no, no, no. For the love of all that is holy, NEVER hold acc units unwrapped”

    From what I can tell, it’s possible to have “excess reportable income” on distributing units too.

    Look at the entry for VWRL (IE00B3RBWM25) on page 6 of this document: https://fund-docs.vanguard.com/TaxdocumentDec2021.pdf

    It seems to say there is 0.0023 (I presume that’s USD) per unit. Or am I misinterpreting? Likely a fairly trivial amount for many investors.

    Liked by 1 person

    1. > it’s possible to have “excess reportable income” on distributing units too.

      That is quite disturbing. I think I will go on the seeking forgiveness due to the relatively small amount, but it points in the direction of ejecting everything other than gold from the GIA.

      Other than 12k of VWRL everything else I have in the GIA are honest individual shares with dividends. Now that’s also a problem in future, but not immediately. So kicking out all the VWRL into the ISA next year along with my BP holding that is showing significant capgain will at least simplify things.

      I don’t have a long history of GIA ownership but the complication is not at all to my taste. I certainly don’t need that sort of detail. It also points to holding the fewest possible instruments in a GIA.

      It’s a pity the cost of carry is so high with spreadbetting, which is outside the tax system 😦

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      1. @DavidV
        Health Warning: this is not my area of expertise.

        From what I can tell, which only relates to what I’ve been able to find about Vanguard investments, is that it can apply to both funds and ETFs in a GIA. But excess reportable income only seems to be a thing in relation to funds domiciled outside of the UK (which for Vanguard UK customers means Ireland), though I can’t fathom why UK funds wouldn’t be hit with the same issue.

        Have a delve through the info on this page which includes a guide to completing a tax return (I downloaded some of the spreadsheets/PDFs in the Reports to Participants section; they only had Irish funds/ETFs, hence my conclusion above):

        https://www.vanguardinvestor.co.uk/investing-explained/general-account-tax-information

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      2. @NewInvestor Thanks for your reply and the very useful link. I agree with your conclusion that it only applies to foreign-domiciled funds. Fortunately I cannot find the Vanguard fund that I hold in a GIA in either of the Reports to Participants. I have just checked that it is UK-domiciled. I also could not find any of the funds I am likely to hold in the lists, but there were included flavours of these popular funds hedged to various currencies. I’m surmising that the core funds (OEICs not ETFs) are usually UK-domiciled but the hedged versions are Irish-domiciled.

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      1. probably worth noting that the seperate post (second link) is from 2014 and not applicable to the current regime. Though inferring from the passage

        However, they won’t have anything to pay on equity funds because the effective basic rate tax on dividends is 0%, once the tax credit is taken into account.

        implies you add it to dividends received, and at the residual levels indicated probably wont push you over the line. I am already over halfway to the £2000 dividend limit for this year, so a lot of that income stuff wants to get kicked into the ISA as well. Fortunately there’s a useful capgain on the income stuff, though that now points to leaving the VWRL be in the GIA, as the income from VWRL is not particularly riveting, even with this runt amount added to the dividends.

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      2. @Al Cam I remember that first article you linked being a rather unpleasant surprise when I first read it. I was fully aware that equalisation reduced the income tax you pay on dividends. What I didn’t appreciate was that it increased capital gains. I had already sold enough of a fund the previous tax year to what I thought was just below the CGT allowance. Only when I read that I had to take the equalisation off the acquisition cost did I realise I had gone slightly over the limit. Fortunately I had that 2013 letter acknowledging my ~£2k loss that I could use a little of to get me below the allowance and avoid reporting to HMRC (I don’t qualify for Self Assessment – more’s the pity, as it would make keeping my tax straight a lot easier). Of course, if @ermine or anyone else had discovered a time limit for carrying forward losses I would have belatedly had to own up to HMRC.

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  15. worth reminding one self that individual gilts are tax free in terms of any gain. I’ve got some in lieu of cash savings.

    Also physical gold sovs…are tax free. I acknowledge that gold is best use from a re balancing perspective hence why the etf form is more usable and if you hold it physical the risk is someone offloads it from you forcibly but just saying….its tax free.

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    1. That is rather wonderful, there’s something quite enchanting about

      >the marten photographed in Kingston is probably one of these guerrilla reintroductions.

      😉

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      1. I have also seen reports of the wee blighters in the New Forest. It’s a pity they can’t be trained to kill wild boar. And deer. Proper pests, those two: destructive of woodland, crops, gardens, …

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  16. rossmartin co uk is how I do Budgets and keep up with tax changes. Subscribe to her free newsletter and the whole lot, including the fine print, is put into an easy to read free newsletter. Not for the general public but easily understandable for investor nerds like us.
    (not an ad or sponsored or affiliated. I’m adding this to address ermine’s desire to get the small print and the stuff that isn’t publicised much)

    Like

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