[UK] Carrying capital gains/losses into UK when moving there, how will they be taxed in future?

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Topic Author
1noob
Posts: 25
Joined: Tue Apr 14, 2020 2:10 am

[UK] Carrying capital gains/losses into UK when moving there, how will they be taxed in future?

Post by 1noob »

So I will be moving to UK later this year to live. Currently I am in a country that does not tax capital gains.

Consider the following example:

Bought $10k of stock A and $10k of stock B in 2019.
After moving to the UK in 2023, let's say I sell all of both stocks in 2024.
Say in 2024 Stock A is worth $20k and stock B is worth $5k.

Would the calculation of capital gain on each be calculated off the base price it was bought at in 2019 (even though I was not living in UK at the time)? If so that would be a gain of 10k on stock A and a loss of 5k on stock B for a net gain of 5k.

Or will it be calculated based off the price on the day I moved to UK? If this is the way it is done then I guess effectively you enter the country with net zero gains/losses, but I somehow doubt it works like this, just checking.

Or some other method?

Also if gains/losses are calculated based off the price in 2019, would it make sense for most people in my position to dispose of their gains before moving, but keep all their losses running to be written off in future tax years? Also if this is the case, just checking that it is legal?

Any advice appreciated. Thanks.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: [UK] Carrying capital gains/losses into UK when moving there, how will they be taxed in future?

Post by TedSwippet »

1noob wrote: Sat Mar 25, 2023 2:40 am Would the calculation of capital gain on each be calculated off the base price it was bought at in 2019 (even though I was not living in UK at the time)? If so that would be a gain of 10k on stock A and a loss of 5k on stock B for a net gain of 5k.
This one, sort of. The UK does not provide any step up/down in basis on becoming resident. And potentially worse (or better), you need to use the UK/currency exchange rate in effect on date of purchase to find your basis in GBP, and (assuming non-GBP stocks) the exchange rate in effect on date of sale to find your sale proceeds in GBP. Your capital gain for UK tax purposes is the difference in these two GBP values.
1noob wrote: Sat Mar 25, 2023 2:40 am Also if gains/losses are calculated based off the price in 2019, would it make sense for most people in my position to dispose of their gains before moving, but keep all their losses running to be written off in future tax years? Also if this is the case, just checking that it is legal?
Yes. Entirely legal. The one thing to watch for might be the UK 'bed and breakfast' rule. Somewhat similar to the US 'wash sale', this disregards sale and repurchase of identical stocks within a 30-day period. Should be okay if done before becoming UK resident, but it's never seemed entirely clear if it applies when that less than 30-day period includes the date UK residency begins.

One additional thought. You might be able to use the UK's 'non-domiciled' tax regime, at least for some period. Careful reading required on that; not my area at all, so aside from mentioning it here, no further intelligent comment.

Finally, are you a US citizen? Just checking. If yes, your investing life will be far more complex than a similarly situated non-US citizen. The wiki can give you details on that, if needed. Also, general information on investing from outside the US, including a handful of UK-specific pages whether a US citizen or not, and which might be useful.
Topic Author
1noob
Posts: 25
Joined: Tue Apr 14, 2020 2:10 am

Re: [UK] Carrying capital gains/losses into UK when moving there, how will they be taxed in future?

Post by 1noob »

TedSwippet wrote: Sat Mar 25, 2023 3:22 am This one, sort of. The UK does not provide any step up/down in basis on becoming resident. And potentially worse (or better), you need to use the UK/currency exchange rate in effect on date of purchase to find your basis in GBP, and (assuming non-GBP stocks) the exchange rate in effect on date of sale to find your sale proceeds in GBP. Your capital gain for UK tax purposes is the difference in these two GBP values.
Ok thanks, I will bear that in mind that 2 different exchange rates apply when calculating the cap gain. Potentially could have quite an effect.
TedSwippet wrote: Sat Mar 25, 2023 3:22 am Yes. Entirely legal. The one thing to watch for might be the UK 'bed and breakfast' rule. Somewhat similar to the US 'wash sale', this disregards sale and repurchase of identical stocks within a 30-day period. Should be okay if done before becoming UK resident, but it's never seemed entirely clear if it applies when that less than 30-day period includes the date UK residency begins.
Ok, just want to check I am understanding this correctly. If I sold all my stocks today and bought exactly the same stocks back tomorrow (well before I entered UK), and then later entered UK it is unclear whether that will count as bed and breakfasting? Obviously if I was already in UK when I did the quick sell/buy it definitely would be B+B, but if the buy was done before entering UK (and also not even in the same tax year I entered UK) it might not qualify as bed and breakfasting? Just checking if I understand the issue.

Edit: actually I think maybe I understand that you are saying it is ok to do as long as you don't enter UK within 30 days of doing the quick sell/buy?
TedSwippet wrote: Sat Mar 25, 2023 3:22 am One additional thought. You might be able to use the UK's 'non-domiciled' tax regime, at least for some period. Careful reading required on that; not my area at all, so aside from mentioning it here, no further intelligent comment.
Thanks, will look into it.
TedSwippet wrote: Sat Mar 25, 2023 3:22 am Finally, are you a US citizen? Just checking. If yes, your investing life will be far more complex than a similarly situated non-US citizen. The wiki can give you details on that, if needed. Also, general information on investing from outside the US, including a handful of UK-specific pages whether a US citizen or not, and which might be useful.
Not a US citizen, but will check out the link on investing from UK, thanks.

edit: and now reading more about bed and breakfasting, its seems the whole point is to prevent people taking advantage of the annual tax free allowance without 'really' disposing of the asset, but since I'll be doing it in a tax year I'm not even resident in the UK and not taking advantage of this allowance, I don't really see how it could apply to me?
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