Capital Gains Tax

Thrugelmir

BIAGD wrote: »

Thanks to all who replied about this matter. The house is now sold and completed and we were presented with our share approx £25,000 each last week.

Did you beat the budget announcement?

As the rate of CGT is calculated by adding the capital gain to earnt income within the tax year? So gain over 43k now incurs a further 10%.

BIAGD

No - it was the day before!!!

Youre kidding?! But we already pay tax on earnings......surely they cannot get us twice?

silvercar

Its the day of exchange that counts. If you exchanged before the budget announcement, the CGT rate is 18%.

BIAGD

It was a day after the budget that we exchanged? Thank heavens. but still feel aggrieved that we must pay 2.5K each out of our 'windfall' to the tax man. We've worked all our lives and had no savings to speak of..........now we get some disposal income (which will be half gone by the end of the week on clearing off debt) and BANG - you're hit again!!

00ec25

BIAGD wrote: »

What is this I hear about putting some of the profit into ISA's? There are 4 of us in the family without ISA's, can I put some of the money into an account for everyone to bring it down?

what you do with the money now you have got it will not affect how much CGT you have to pay, you cannot rollover the profit into an ISA and claim CGT relief on your profit just because the money is now in an ISA. Sorry but no such relief exists

That said if you do not have an ISA then you really should get a cash based ISA and put in the maximum allowed this tax year so you have some cash savings sheltered from tax. Having a cash ISA is a low risk strategy, do not do a stocks and shares ISA unlesss you understand what you are doing and are happy to risk losing money. You will not lose money with a cash ISA but watch interest rates versus inflation rates like a hawk so your savings are not eroded by inflation

PS. You will need to physically transfer (ie gift) the money from you to your OH to allow the OH to open an ISA in their name using "their" money. There are no tax implications for such a "gift"

BIAGD wrote: »

. We have sold house but not completed until end next week.

17 June

BIAGD wrote: »

Yes, it will be 25K each and luckily the exchange has taken place

18 June

BIAGD wrote: »

No - it was the day before!!!

28 June

BIAGD wrote: »

It was a day after the budget that we exchanged?

28 June

from the above confusion I think you exchanged before 22 June so
you will pay CGT at 18% on the net gain and you can ignore the budget changes

BIAGD

Thanks for that;) Sorry I got everyone confused....probably because I AM CONFUSED:rotfl:

and will be for a long long time where this is concerned.......So putting cash into an ISA alleviates the need to pay tax on it when you put in your tax return - so why does it have a section for investments and savings?? on the form. Do we just not mention anything that is in an ISA then? and when it says things like any income that year from property do I then put down the whole amount or the amount less what I have gifted to others/paid off debt?

Sorry to sound so niave - but I am

silvercar

ISA is totally separate. Deal with the CGT first. Declare the income from a property sale and pay the tax on that.

Now you can invest the money you made from the sale. If you put it in standard investments/ savings etc you may earn some interest. This interest is taxeable. (Yes, even though you paid tax on getting the money in the first place! You haven't paid tax on the interest the money has given you, so that is taxeable.) If you invest some of the money in an ISA then the interest gained is tax free and doesn't need including on your tax return.

Example

You make a capital gain of £25000 on the property sale. Include it in your tax return, use your CGT allowance and pay CGT of (25-10.1k) x 18% = £2,682.

You now have £22,318 left.

Invest £10,000 in a cash ISA paying say 3% = £300 interest gross.
Invest the remaining £12,318 in a saving account paying 3% = £370. Pay tax on this £370 at 20% = £74, leaving £296.

So the only tax you pay on this property sale money, after the intial CGT bill is £74 if invested in this way.

(Actually the tax will be taken at source for a basic rate tax payer. A higher rate tax payer pays the extra bit through his tax return.)