What is the cheapest way to sell my shares and avoid a big tax bill? (2024)

I want to cash in my large share portfolio: what's the cheapest way to do it and can I avoid a big tax bill?

By This Is Money

Published: 09:31 BST, 3 February 2014 | Updated: 09:37 BST, 4 February 2014

I have a portfolio of shares I want to offload. How much can I sell without paying capital gains tax? What company will sell them for me at the cheapest rate?

This is Money replies: To answer the first part of your question first. The tax that applies on profits on investments, such as shares, funds or property, is capital gains tax. Every year individuals get a capital gains tax allowance, which for 2013 to 2014 is £10,900 across all your investments - any profits below this are not liable for CGT, according to Gov.uk

Above this you pay capital gains tax at either 18 per cent or 28 per cent depending on whether you are a basic rate or higher rate taxpayer, although profits are added to your income to decide in which category you fall.

You can pass assets between a husband and wife, free of tax, so essentially spouses can double up their allowance each year.

Those with large amounts of shares to sell that will mean profits considerably above the CGT allowance, sometimes opt to drip sell them over a number of years. Share prices will inevitably change throughout this time though, which will affect profits.

You can protect investment gains from CGT by holding shares through an Isa.

Marc Shoffman, of This is Money, replies: There are two ways to hold shares. You could hold them online through a DIY platform or hold paper certificates.You do not make clear in your question in which way you hold your portfolio.

A DIY platform sets up a nominee account that holds the shares on your behalf, this tends to reduce the transaction costs and speed up deals. You can see all your holdings in one place, buy and sell, pay more money in or take money out, and should always make sure it is an FCA regulated platform.

The alternative to this is the old-fashioned way of holding shares, done through paper certificates.

These are sent to you in the post and display the amount of stock you hold in an individual company. You can buy and sell these by post and will need to store them yourself.

Many long-term shareholders, or those who bought into privatisations will tend to hold shares this way. Selling shares will typically involve speaking to a stock broker to arrange a deal for you, or alternatively some companies that you hold shares in may offer a share dealing service.

From your question, it sounds like you hold the shares in paper form. This makes selling them more expensive, as dealing charges are higher than they are for DIY investing platform nominee accounts.

But you can still cut your trading costs.

You are able to transfer them into an online trading account, if you wish, which would reduce the paperwork you have to hold onto and then deliver cheaper dealing fees.

Alternatively. you can sell shares by speaking to a broker or through a DIY investing platform.

The cost of trading shares varies depending on the platform or broker you are using and whether you are selling your shares online, or in the case of paper certificates, on the phone or by post.

For example, Hargreaves Lansdown has tiered dealing charges for online share dealing. It will cost you £11.95 for zero to nine deals per month, £8.95 for 10 to 19 and £5.95 for 20 or more.

But if you are selling share certificates, Hargreaves Lansdown takes 1 per cent for the first £10,000, 0.5 per cent for the next £10,000 and 0.25 per cent thereafter, subject to a minimum charge of £20.

It would therefore cost you £100 to sell £10,000 worth of shares - if you held £50,000 worth of shares, split evenly across five companies this could prove expensive.

But as with anything in life, shopping around can pay off.

For example, This is Money's partner share dealing service, provided by the Share Centre, lets you sell share certificates for a flat fee of £20.00 per £25,000.

There is no administration fee.

If you decide to transfer your shares into a DIY investing platform you could then benefit from lower standard nominee account charges.

For example, you could transfer the share certificates into a This is Money's share dealing service account with the Share Centre platform for free and sell them for a flat fee of £12.50.

This is Money's guide to the best DIY investing platforms has more information on charges.

Bear in mind that if you have an existing stockbroker it may be worth calling them up, asking what they would charge, pointing out how much you have discovered that you could save on this and asking if they can match the price.