Avoiding the 30-day matching rule and calculating your CGT when selling shares

Avoiding the 30-day matching rule and taking advantage of your annual CGT

Sometimes you’ll want to take advantage of your annual CGT to crystalize some gains and carry on with your investing. HMRC created the 30-days matching rule to forbid Bed-and-Breakfasting, however the rest of the methods detailed below could be used to maximize your annual CGT allowance:

  • Bed-and-Breakfasting (Not allowed):

    • this consist on you selling some shares and buying them back under your name again on the next 30 days. In this case, HMRC will treat these shares as if you’d have never sold them.
  • Bed-and-ISAing:

    • in this case you don’t even need to wait 30 days, you can use your ISA allowance to shelter the profit of the shares you sold from further taxes.
  • Bed-and-Spousing:

    • you could use this technique to sell your shares and have your spouse buy them under her/his name.
  • Bed-and-Options, Bed-and-Spread Bettign
    & Bed-and-CFDing

    • you could use options, spread betting or CFDs (contracts for difference) in order to keep exposure to the underlying asset that you’ve just sold to maximize your annual CGT exemption.
  • Similar Shares and Funds

    • If you want to crystalize your profit or loss for the current tax year and don’t feel comfotable with derivatives or any of the other possibilities detailed above, you could always buy a similar share or fund that would avoid HMRC ’30-day’ matching rule.
  • Just wait 30 days for repurchase

    • If you’ve got a large CGT profit that could be offset against your annual CGT allowance, it might be worth selling during the current tax year even if you lose part of their growth during the following 30 days as you will have saved a higher amount on tax anyway.

Selling or disposing of part of your shareholding

You can read about this subject on the HMRC selling shares guide and understand more about how to calculate your own CGT bill by usint this CGTCalculator, the main considerations are that the order in which you must match shares is:

  • Shares bought and sold on the same day
  • Shares acquired within 30 days after selling (Last In-First Out rules)
  • Section 104 Holding (shares bought at any other time):
    • for Sales that occur after 2008 the Buy trades are pooled into a section 104 holding (in order to calculate the average purchase price)
    • for Sales in previous tax years they are matched by following the Last In-First Out (LIFO) rules

At some point during your investing life you might need to calculate the capital gains for company take-overs or bonus and rights issues, these have special rules and we’ll better leave them out for clarity for now.

Related posts: