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  • FIRST POST
    • PokerPlayer111
    • By PokerPlayer111 17th Apr 17, 12:50 PM
    • 17Posts
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    PokerPlayer111
    Capital Gains Tax Allowance & My Regular Earnings? How Does It Work?
    • #1
    • 17th Apr 17, 12:50 PM
    Capital Gains Tax Allowance & My Regular Earnings? How Does It Work? 17th Apr 17 at 12:50 PM
    Lets say i have an investment which i've not yet cashed out and investment is worth 100k (if i did cash it out all today).

    Can i just cash out 11k this tax year and pay no capital gains tax ?

    Does it matter what i've earnt in my regular business that year? If i earn 12k that would be tax free also etc, plus i could cash out 11k from my investment would = 23k cash tax free on the year, is that ok to di it like that ?

    Can you just cash out 11k each year from your investments ongoing and its tax free? i guess you can ?
Page 1
    • bowlhead99
    • By bowlhead99 17th Apr 17, 1:09 PM
    • 6,322 Posts
    • 11,171 Thanks
    bowlhead99
    • #2
    • 17th Apr 17, 1:09 PM
    • #2
    • 17th Apr 17, 1:09 PM
    The 11k for capital gains (well just so we're talking about the right one, the 11,300 for tax year 2017/18) is an exemption for the first 11,300 of gains you make in that tax year.

    So, for example if you have investments of 100,000 which had cost you 60,000. There is a gain of 40,000 if you sold the whole lot. 40% of everything you sell is gain, and 60% is just you getting your costs back.

    If you sell only half of it (50,000 of proceeds), you won't make 40,000 of gains, you'll only make 20,000 of gains on top of the 30,000 cost which you had originally spent to buy that half of the whole investment . And you can take the 11,300 allowance off that 20,000 of gains so that only 8,700 of the gains are actually taxable.

    If instead you only sold (cashed-out, as you say) 30,000 of the 100,000 investment and left 80,000 untouched, then you have only sold three tenths of the investment which had cost you 40,000 to buy in the first place, and the other seven tenths hasn't been sold at all and does not produce any chargeable gain. So in that situation you have sold an investment for 30,000 which had cost 18,000 to buy; your gain is 12,000. Taking the 11,300 exemption off the 12,000 gain you have only 700 of taxable gain which might cost you 70-140 of tax depending on whether you are a basic or higher rate taxpayer.

    If you had instead taken and sold only 18k out of the investment, and only 40% of it is gain and 60% of it is you getting your cost back, your gain will be under 11,300 with no tax to pay at all.

    The capital gains taxes you owe on your gains are separate from the income taxes you pay on your salary or business profits. So yes you can certainly make 11,500 of business profits in a year without paying income tax and then also make 11,300 of capital gains in a year without paying any capital gains taxes.
    Last edited by bowlhead99; 18-04-2017 at 1:32 PM.
    • Pincher
    • By Pincher 17th Apr 17, 2:00 PM
    • 6,488 Posts
    • 2,463 Thanks
    Pincher
    • #3
    • 17th Apr 17, 2:00 PM
    • #3
    • 17th Apr 17, 2:00 PM
    The ~11k allowance cannot be carried forward.
    You don't use it, you lose it.

    Tax year 2016/17 had a capital gains allowance of 11,100, so you could have sold to achieve ~11k of gains, in March 2017, and then sell another load in April (6th onwards) 2017, to use the 11,300 allowance in 2017/18.

    The tax point can be a little tricky, as it's different for different things. For shares it's day of trade, not settlement date. For property it's day of completion, not exchange of contract.

    Sadly, you can't sell 10% of a house, to use up the annual allowance as you go along. Well, I suppose you can, but who will buy the 10%?
    What happens if you push this button?
    • TheShape
    • By TheShape 17th Apr 17, 2:11 PM
    • 864 Posts
    • 610 Thanks
    TheShape
    • #4
    • 17th Apr 17, 2:11 PM
    • #4
    • 17th Apr 17, 2:11 PM
    The 11k for capital gains (well just so we're talking about the right one, the 11,300 for tax year 2017/18) is an exemption for the first 11,300 of gains you make in that tax year.

    So, for example if you have investments of 100,000 which had cost you 60,000. There is a gain of 40,000 if you sold the whole lot. 40% of everything you sell is gain, and 60% is just you getting your costs back.

    If you sell only half of it (50,000 of proceeds), you won't make 40,000 of gains, you'll only make 20,000 of gains on top of the 30,000 cost which you had originally spent to buy that half of the whole investment . And you can take the 11,300 allowance off that 20,000 of gains so that only 8,700 of the gains are actually taxable.

    If instead you only sold (cashed-out, as you say) 20,000 of the 100,000 investment and left 80,000 untouched, then you have only sold one fifth of the investment which had cost you 40,000 to buy in the first place, and the other four-fifths hasn't been sold at all and does not produce any chargeable gain. So in that situation you have sold an investment for 20,000 which had cost 8,000 to buy; your gain is 12,000. Taking the 11,300 exemption off the 12,000 gain you have only 700 of taxable gain which might cost you 70-140 of tax depending on whether you are a basic or higher rate taxpayer.

    If you had taken only 18k out of the investment, and only 40% of it is gain and 60% of it is you getting your cost back, your gain will be under 11,300 with no tax to pay at all.

    The capital gains taxes you owe on your gains are separate from the income taxes you pay on your salary or business profits. So yes you can certainly make 11,500 of business profits in a year without paying income tax and then also make 11,300 of capital gains in a year without paying any capital gains taxes.
    Originally posted by bowlhead99

    Should those numbers not be 60,000, 12,000 and 8000?
    • PokerPlayer111
    • By PokerPlayer111 18th Apr 17, 1:06 PM
    • 17 Posts
    • 1 Thanks
    PokerPlayer111
    • #5
    • 18th Apr 17, 1:06 PM
    • #5
    • 18th Apr 17, 1:06 PM
    The ~11k allowance cannot be carried forward.
    You don't use it, you lose it.

    Tax year 2016/17 had a capital gains allowance of 11,100, so you could have sold to achieve ~11k of gains, in March 2017, and then sell another load in April (6th onwards) 2017, to use the 11,300 allowance in 2017/18.

    The tax point can be a little tricky, as it's different for different things. For shares it's day of trade, not settlement date. For property it's day of completion, not exchange of contract.

    Sadly, you can't sell 10% of a house, to use up the annual allowance as you go along. Well, I suppose you can, but who will buy the 10%?
    Originally posted by Pincher
    Yeah i've potnetially messed up i could have have took 11k in march and now april but anyway...

    Me and the GF own the investment so do we get 22k per year tax free on capital gains? can i cash it out in my name and then just bank transfer her 11k or do we have to both cash out in our own names?
    • Eco Miser
    • By Eco Miser 18th Apr 17, 1:11 PM
    • 2,800 Posts
    • 2,592 Thanks
    Eco Miser
    • #6
    • 18th Apr 17, 1:11 PM
    • #6
    • 18th Apr 17, 1:11 PM
    You each get ~11k. It's not transferable.
    Eco Miser
    Saving money for well over half a century
    • bowlhead99
    • By bowlhead99 18th Apr 17, 1:28 PM
    • 6,322 Posts
    • 11,171 Thanks
    bowlhead99
    • #7
    • 18th Apr 17, 1:28 PM
    • #7
    • 18th Apr 17, 1:28 PM
    Should those numbers not be 60,000, 12,000 and 8000?
    Originally posted by TheShape
    Yes, i changed the example as i was writing out from 50:50 to 60:40 to make it clearer and then changed one bit the wrong way, thanks. Now changed again to give the same of gains.
    Last edited by bowlhead99; 18-04-2017 at 1:33 PM.
    • PokerPlayer111
    • By PokerPlayer111 18th Apr 17, 4:30 PM
    • 17 Posts
    • 1 Thanks
    PokerPlayer111
    • #8
    • 18th Apr 17, 4:30 PM
    • #8
    • 18th Apr 17, 4:30 PM
    You each get ~11k. It's not transferable.
    Originally posted by Eco Miser
    the investment is in crypto currency so its in nobodys name right now but it is both our investment, if i cash out 22k into my bank via my name and then send her bank 11k is that a legit way to do things? or will the gov think i've "given" her 11k so i dont have to pay tax?
    • Malthusian
    • By Malthusian 18th Apr 17, 4:51 PM
    • 2,001 Posts
    • 2,864 Thanks
    Malthusian
    • #9
    • 18th Apr 17, 4:51 PM
    • #9
    • 18th Apr 17, 4:51 PM
    the investment is in crypto currency so its in nobodys name right now
    Originally posted by PokerPlayer111
    Yes it is. Did the money come out of a joint name account or single name? If single name, did your girlfriend transfer you half the money before you bought the cryptocurrency? Is there any other paper trail that would prove you purchased the cryptocurrency on behalf of both of you?

    If it is in reality in your sole name, the other option is to marry her, then you could transfer half to her without capital gains tax applying.
    • PokerPlayer111
    • By PokerPlayer111 19th Apr 17, 10:31 AM
    • 17 Posts
    • 1 Thanks
    PokerPlayer111
    Yes it is. Did the money come out of a joint name account or single name? If single name, did your girlfriend transfer you half the money before you bought the cryptocurrency? Is there any other paper trail that would prove you purchased the cryptocurrency on behalf of both of you?

    If it is in reality in your sole name, the other option is to marry her, then you could transfer half to her without capital gains tax applying.
    Originally posted by Malthusian
    The money came out of my name originally and she made no specific payment right before i invested... however shes been transfering my her whole wages for like 7 years to my bank account on a monthly basis. I just do all our bills/rent/investments/everything you see. Only in the last 4 months did she ever open up any ISA savings in her name and we've been together 10 years. haha pretty crazy really.

    So is it tax free legit if i just cash out 22k in my name and send her 11k? or do i have to marry her in this situation?
    • Malthusian
    • By Malthusian 19th Apr 17, 11:59 AM
    • 2,001 Posts
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    Malthusian
    The money came out of my name originally and she made no specific payment right before i invested... however shes been transfering my her whole wages for like 7 years to my bank account on a monthly basis. I just do all our bills/rent/investments/everything you see. Only in the last 4 months did she ever open up any ISA savings in her name and we've been together 10 years. haha pretty crazy really.
    Originally posted by PokerPlayer111
    Yes, verging on lunacy actually. It's going to be fun if you split up and she wants "her" money back.

    So is it tax free legit if i just cash out 22k in my name and send her 11k? or do i have to marry her in this situation?
    Well, firstly if you cash out 22,000 you deduct from that what you paid for the cryptocurrency originally, and that is your capital gain.

    So let's say you paid 50,000 for the cryptocurrency and it's now worth 100,000. If you cash out 22,000, you deduct the 11,000 you paid for that 22,000, which leaves a capital gain of 11,000.

    As to whether you can crystallise a gain of 22,000 and have it treated as 11,000 for each of you - maybe. You could argue that the money in your "sole" account is beneficially owned by both of you - a de facto joint account - given that both your incomes are paid into it and your joint bills are paid out of it. And therefore the cryptocurrency bought from that money is beneficially owned by both of you as well. The question is, do you want to have that argument with HMRC if they challenge your tax returns? (If you cash out 100,000 you will both have to put the gain on your tax returns even if no tax is payable.)

    Personally I wouldn't chance it, and I would therefore either a) sell only half now, and hold on to the rest to sell in the next tax year b) take the hit and pay the 10% CGT or c) marry the girl and then transfer half into her name.

    Either way I would put your girlfriend's name on the bank account so you know whose money is whose. (That won't retrospectively affect the ownership of the cryptocurrency.)
    Last edited by Malthusian; 19-04-2017 at 12:02 PM.
    • PokerPlayer111
    • By PokerPlayer111 19th Apr 17, 2:03 PM
    • 17 Posts
    • 1 Thanks
    PokerPlayer111
    ok thanks for all the info. 11k crypto currency can be cashed out in her name to her bank and 11k in my name to my bank via us both setting up accounts with crypto exchanges, just means hassle and It just feels like its as if we are trying to be "clever" doing it like that when we aren't.

    And my CGT would = 10%? on anything over 11k (minus original invesment) if its only 10% thats not bad i thought it was higher.
    • AndyT678
    • By AndyT678 19th Apr 17, 2:33 PM
    • 654 Posts
    • 863 Thanks
    AndyT678
    ok thanks for all the info. 11k crypto currency can be cashed out in her name to her bank and 11k in my name to my bank via us both setting up accounts with crypto exchanges, just means hassle and It just feels like its as if we are trying to be "clever" doing it like that when we aren't.

    And my CGT would = 10%? on anything over 11k (minus original invesment) if its only 10% thats not bad i thought it was higher.
    Originally posted by PokerPlayer111
    When you transfer the currency from your account to hers it will count as a capital gain for you at that point because you are not married. If you use up your allowance doing this you will not also be able to sell without CGT.

    CGT rates depend on your income tax band, 10% for basic rate and 20% for higher rate.
    • Malthusian
    • By Malthusian 19th Apr 17, 2:46 PM
    • 2,001 Posts
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    Malthusian
    As long your gains over the allowance plus your income in the tax year is less than 45,000 it's 10%. If any of the gain is above the higher rate tax band it becomes 20%.

    It's 18% and 28% on residential property and carried interest.
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