No, I’m not talking about staying away from home for the weekend – haven’t you heard that we are still in lockdown?
The Bed and Breakfasting that I am talking about is the act of selling a share and buying it back again to realise a gain or a loss.
Why would you want to do that I hear you ask – surely that is a waste of time or an expensive hobby!
There are a few reasons why this could be a good idea for you…
Selling a share will realise the capital gain or loss in the current tax year. This will mean you can use your annual capital gains allowance for the year or offset the capital loss against other gains from another asset.
You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount). The Capital Gains tax-free allowance is: £12,300.www.gov.uk
You may want to move the share into a more Tax efficient wrapper before the new tax year. For example I just sold ABDP today to move it from a company trading account into my ISA. This way I won’t let gains build up to hit me in 1 year and of course the more the gains compound the bigger the bill can be!
Now of course HMRC have to spoil all the fun and there are rules…
So if you want to buy back the same shares, then you have to wait for more than 30 days from the date of sale before you buy them back. If you buy them back before that you may as well have just kept them. (unless you buy them back cheaper of course).
If a disposal of shares is identified with shares acquired within the following 30 days, the gain or loss on disposal is the difference between the net disposal proceeds and the acquisition cost.gov.uk
Of course you can buy them within a different account type like an ISA, SIPP or SSAS straight away like I did as mentioned above. This means that you will not be out of the market and missing out on any gains.
This is just some food for thought – of course do your own research but now is the time to top up your ISA or Pension before the tax year is over (5th April 2021) and use your annual contribution allowance before you loose it.
What do you do coming up to the end of a Tax year?- It would be great to hear your ideas and tips
P.S While you are here why don’t you take a look at my current holdings or enter your email to be notified of any updates…