Offset CGT via pension contribution?

sunsol

Does anyone know if the 18% tax paid on capital gains can also be reclaimed on pension contributions.

Example:
I sell some shares and realize a capital gain of ₤19,600 which after deduction of the ₤9,600 allowance leaves me with ₤10,000 on which I will need to pay ₤1,800 CGT (i.e. 18%). If I then put an extra ₤10,000 into my pensions could I effectively offset this tax liability?

Thanks.

fengirl_2

Income Tax and CGT are two separate taxes. relief for pension contributions can only be offset against earnings - not investment income or gains.

middlepuss

sunsol wrote: »

Does anyone know if the 18% tax paid on capital gains can also be reclaimed on pension contributions.

If only it could be!

trevormax

sadly I dont think that is possible. However, if you are married or in a civil relationship, you are allowed to gift shares to your spouse and no CG tax will be due. They would then be able to use their own allowance saving a lot of money.

middlepuss

trevormax wrote: »

you are allowed to gift shares to your spouse and no CG tax will be due.

What documentation do you need to satisfy HMRC that you have gifted shares to your spouse? Also, if shares are held in joint names by spouses can you arbitrarily decide at the time of sale who owned how many of them?

spursboy

My thoughts are that it would be 'swings and roudabouts'

If you pay a contribution of £10,000 then tax relief will be given by an extension of your basic rate band:

£10,000 *100/80 (grossed up as paid net of tax) = £12,500

Thus meaning that £12,500 of income will be taxed at 20% rather than 40% and saving you £2,500.

If you time it so that the gain arises in the same year as the pension contribution then you will be better off by £2,500 less £1,800 = £700