Do you know how to declare gains made on disposing of shares in the United States of America as a UK resident?
To calculate chargeable gains on disposal of shares, an individual should gather few important information which will help perform Chargeable Gains Tax Computations.
a) The date when shares were bought and number of shares.
b) Any associated purchase costs.
c) The date when Shares were sold, and number of shares sold.
d) Any disposals costs associated with the shares.
e) Disposal Proceeds.
f) Any gains tax paid to the US.
g) Any Withholding tax paid to the US.
Now chargeable gains tax should be calculated for each set of disposals made by the individual for the tax year and identify chargeable gains tax (Under UK legislation) for each disposal.
Chargeable gains tax should be declared on Capital Gains Section of the tax return.
As the US has already charged a withholding tax on disposal of shares and FTCR should be claimed through SA106. The box no. 2, 33, 38, 39 and 40 should be filled.
The foreign tax credit will be lower of chargeable gains under the UK and tax suffered in the foreign country (in this case the USA).
For example, if £500 were charged on a gains of £3333 in the US and there are no chargeable gains in the UK on the same gain then FTCR will be nil.
However, if £500 were charged on a gain of £3333 in the US and the UK CGT comes to £666 on the same gain then the FTCR will be £500 (lower of foreign tax and the UK tax).
Please note that the information provided above is correct at the time of writing and applicable to the United Kingdom for the tax year of 2020-21. Information provided is for guidance purposes only and professional assistance should be sought before acting on any of the information.
Written by Justyna Witkowska