Money: Make the most of shares

READERS' LIVES

Tax relief on share sales ... pension plans for twentysomethings ... what's in it for Halifax overseas members? Your queries answered

Despite the fact that I have shareholdings in 10 different companies, I still feel fairly green when it comes to shares. My portfolio started in the Eighties, when I subscribed for privatisation shares. Also, I seem to have been in the right place at the right time to benefit from various demutualisations, including Abbey National. I'd now like to cash in some of these investments. Does the new 10-year rule on capital gains tax make it easier?

WM, Liverpool

What you refer to as the new 10-year rule does not apply to your shareholdings just yet. A new capital gains "taper relief" was announced in the March Budget. The principle behind the relief is that the longer you hold an asset (such as shares), the lower your tax bill will be when you sell or otherwise dispose of the asset. For your shares (and other non-business assets) you will be charged only 95 per cent of the full rate of capital gains tax if you dispose of them after holding them for three complete years. The rate of tax then decreases in stages until you get full taper relief on assets held for 10 complete years. You will only pay 60 per cent of the full tax bill on shares held for 10 or more years. In practice, the relief is not quite as simple as this. It throws up complications which the small print should sort out.

In any case, it will not apply to sales of shares you make in the near future. The relief is based on the number of complete years you hold an asset after 5 April 1998. An exception applies to assets held before 17 March 1998. An extra year is added to these assets, so you will already have clocked up one year for shares held before 17 March but you will need to keep them for another two years from 5 April this year before you can get taper relief. That makes 6 April 2000 the earliest date on which you can sell your shares and get some taper relief.

Nevertheless, you may already be able to cash in a reasonable chunk of your shares without incurring a tax bill. You do this by making use of the tax exemption on annual capital gains tax. You can make pounds 6,800-worth of chargeable gains in the current tax year (from 6 April 1998 to 5 April 1999) without paying tax. Then you will be able to make more tax-free chargeable gains next year.

The key word is chargeable. Not all the cash you get from selling your shares is chargeable. First, you deduct from the sales proceeds the cost of buying the shares (what you paid for the privatisation shares, and nothing in the case of demutualisation shares). You also take off your indexation allowance, which increases your buying costs in line with inflation until April 1998. (It takes no account of inflation after April 1998 because the taper system is being introduced.) For example, between April 1982 and April 1998 the retail price index doubled. Let us say you bought some shares for pounds 1,000 back in April 1982. When you sell those shares, you will be able to deduct the pounds 1,000 buying cost and an indexation allowance of pounds 1,000 from the sale proceeds. What is left will be your chargeable gain, but the first pounds 6,800 of all chargeable gains will be tax free. Get leaflet CGT14, "Capital Gains Tax: An Introduction" from your tax office for more details.

I am 26 and work for a small business. There is no pension scheme. I won't be working here forever and may one day have a job where I'll be able to join a company pension scheme. Is it worth taking out a personal pension in the meantime?

LM, Hertfordshire

Some advisers say you are never too young to start your pension. If you can afford to make pension contributions in your 20s you probably should. You can never foresee what may happen that may make paying into a pension difficult for you later on. The earlier you start, the more your money grows.

As a general rule, those who have the chance to join an employer's scheme should do so. Unfortunately, many people join company schemes after they have been paying into a personal plan and then find the personal plan is virtually worthless. (You cannot join a company pension and keep paying into a personal scheme.) So choose a personal pension with care. Go for one with maximum flexibility in terms of contribution levels and retirement date. Single-premium plans carry less risk of penalties or ongoing charges whittling away at your fund than regular premium policies, which demand ongoing commitment.

Compare the (theoretical) transfer values of different personal pensions in future years. You may be able to transfer that money to an employer's scheme at some point in the future. Also, check whether you would be able to convert the personal pension into a free-standing additional voluntary contributions scheme (FSAVC), a pension top-up, in the future. If you can, then you could carry on paying into the plan after you have joined a company scheme.

Has a final decision ever been made on the rights of Halifax account holders with overseas addresses to get free shares?

DL, Lancashire

MANY overseas members did get windfall shares last year when the former building society became a bank. But Halifax said it was unable to distribute free shares to people in certain countries for legal and other reasons. As far as Halifax is concerned, the matter is settled.

However, a group of aggrieved overseas account holders is pursuing a class action. The case is being handled by the solicitor Jeffrey Goldberg, who can be contacted at Cranswick Watson Solicitors, 7 Greek Street, Leeds LS1 5RR.

At present, Mr Goldberg is waiting for a barrister's opinion on the merits of the case and on how to pursue it.

Write to the personal finance editor, `Independent on Sunday', 1 Canada Square, Canary Wharf, London E14 5DL and include a phone number, or fax 0171 293 2096, or e-mail i.berwick@independent.co.uk. Do not enclose SAEs or any documents you wish to be returned. We cannot give personal replies or guarantee to answer letters. We accept no legal responsibility for advice given.

Arts and Entertainment
books
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
PROMOTED VIDEO
Life and Style
3D printed bump keys can access almost any lock
techSoftware needs photo of lock and not much more
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
News
i100
News
The Digicub app, for young fans
advertisingNSPCC 'extremely concerned'
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model of a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution