CGT on investment fund income

Hi there I have an investment portfolio and take out £25,000 every year as part of my pension. I'm not clear whether I pay CGT on the £25,000 that I take out or on the gains or losses within the portfolio? So for example, if the portfolio lost £10,000, I assume that I pay no CGT regardless of what I take out (which was already taxed as income at source before I put it into the portfolio) And if the portfolio gains £10,000, I pay CGT on the £10,000? On my self-assessment, do I report the income, the gains/losses or both? Sorry for all the questions and grateful for any advice received.

Hi dlamb,
If the gains/losses have arisen due to buying/selling shares within the portfolio, then yes this will be subject to  Capital  Gains  Tax if above the annual exempt amount.
The withdrawal of income is not taxable as this is the capital that you are removing.
Thank you. 

 

Thank you very much for your reply. Perhaps one follow up question? If the gains/losses are a result of changes in share price within the portfolio and not due to share sale, would this be subject to CGT? Many thanks in advance 

Hi,

No. The gain is when you sell the item.

Thank you.

Many thanks again for all your help. Can I just ask one more question on exactly what is taxed? If for example the overall portfolio gains £10,000 over the tax year and I sell £25,000 worth of shares to take as income, I assume that I pay tax on the £10,000 (the gain) rather than the £25,000 (the income - I asume the rationale being that £15,000 of this is original capital that hasn't made a gain and was originally taxed at source and the remaining £10,000 is gain). And similarly, if the gain were £30,000 and I sell £25,000 worth of shares to take as income, I would presumably pay tax on the £25,000 (the income from share sale). Sorry for the stupid questions, but just want to make sure I get it exactly right. Many thanks in advance 

That's not correct, and it can be significantly more complicated than that. It doesn't matter what your overall portfolio value change is (that gain or loss is unrealised). If you sell £25k worth of shares, you work out how many shares sold, and in the simplest case, the difference between the sale price and your average acquisition cost (you might have bought many lots at different prices over the years) is the taxable gain or loss. If you sold more than one different investment/holding, you need to repeat that calculation for each holding. It gets more complicated if you are selling accumulating fund units or offshore funds (e.g. ETFs). Because there you can increase your cost basis by the amounts of any notional dividends. You might want to engage an accountant to go over your transaction history and ensure you are submitting correct figures.

Perfect. Many thanks. This is much clearer. I thought there was a missing piece and this is it.

Hi David,

The taxable gain will be on the items you sell that you get more than what you paid for. This should all be accounted for in the portfolio.

See further guidance at:

Tax when you sell shares

Thank you.