Investing in Shares is becoming more widespread in Ireland as share dealing prices come down and online trading becomes more common .
Capital Gains Tax
If you sell shares or any item of property for a higher price than you originally paid for it, you are deemed to have made a capital gain. This capital gain is subject to a tax called Capital Gains Tax (CGT) – which is currently 33%
The first €1,270 of taxable gains in a tax year are exempt from CGT. You can also deduct any trading costs from any profit.
Example of CGT on Shares
- You purchase shares in January 2018 at a cost of €5,000 including stamp duty and trading fees
- You sell them in October 2018 for €8,000.
- Disposal proceeds €8,000
- Cost price €5,000
- Chargeable Gain €3,000
- Deduct: Personal CGT exemption €1,270
- Net Chargeable Gain = €1,730
- Chargeable @ 33% Capital Gains Tax due €570.90
For comparison – if someone made €3000 interest on a deposit account in a year they would be charged DIRT at 33% totalling €990 . (€420 more)
(More about DIRT here)
When to pay your CGT
For disposals made between:
- 1st January and 30th November , you must pay CGT by 15 December of the same year.
- 1st December and 31st December (the later period), you must pay CGT by 31st January of the next year.
You can register for CGT and pay it using Revenue’s online service (or myAccount if you are PAYE ) .
You need to file a tax return by 31st October in the year after the date of disposal. Revenue say you must do this even if no CGT is due because of reliefs or losses
How to Take Advantage of the CGT Annual Exemption
The annual tax-free CGT exemption of €1270 cannot be carried forward from year to year. So to reduce or avoid some CGT you can do the following :-
If you have shares that have increased in value you can make a disposal of a sufficient number of shares each tax year to give a gain of €1,270 which is equal to the annual tax-free exemption.
The shares disposed of can be immediately re-acquired if you wish to retain ownership of them.
These transactions are sometimes referred to as “Bed & Breakfast” sales. You need to consider any charges e.g. Stamp Duty , and compare it to the tax saving. (Stamp duty on sale and purchase of 1%)
You can check stockbroker fees on our comparison of online share dealing prices in Ireland
- You purchase 10 shares in January 2018 at a cost of €500 each
- In October 2018 they are worth €800 each.
- Each share has gained €300 each
- You sell 4 shares for €3200- creating a capital gain of €1200 – which is exempt from CGT. (Stamp Duty of €32)
- You buy back the same 4 shares (assume for the same price) Stamp Duty €32.
- In another years time you sell all 10 shares for €10000
- Your total CGT liability will be lower because the 4 shares you bought back the previous year cost you €3240 not the original price of €2000.
- Gain on the 6 shares bought in 2018 is €500 each – a total of €3000
- The gain on the 4 shares sold and bought again for €800 each in October 2018 is just €200 each – a total of €800.
- Total gain on all 10 shares is €3800 (CGT = €834.90)
- If the sale and repurchase didn’t take place in Oct 2018 – the total capital gain would have been €5000 and CGT would have been €1230.90, an extra €395 (less the extra stamp duty of €64).
Losses on Shares
If you have shares which have gone down in value and you wish to use the loss incurred on the shares against other gains then you must dispose of the shares in the same tax year as other shares sales upon which you have made a gain.
Sometimes you may want to keep the shares which have gone down in value in the hope of them increasing in value in the future. To get the tax benefit of the reduction in value you must dispose of the shares. You can, if you wish, re-acquire the shares but you must wait for a period of four weeks before doing so to ensure that the loss realised can be offset against other gains.