Emergency Budget: Capital Gains Tax to rise

edited 22 June 2010 at 12:08PM in Cutting Tax
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MSE_GuyMSE_Guy MSE Staff
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edited 22 June 2010 at 12:08PM in Cutting Tax
This is the discussion thread for the following MSE News Story:

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  • jakes_2jakes_2 Forumite
    2 Posts
    How will CGT be calculated now on large gains? For example, I am a non-taxpayer with negligible income, living off savings. If I sell a second home which has never been a PPR and make a gain of £100,000, for example, will the magnitude of the gain take me into the 28% bracket?
  • Stavros_3Stavros_3 Forumite
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    The thread title is misleading. It is only rising to 28% for higher rate earners. It is not changing for basic rate tax payers, plus the annual exemption allowance is not changing, something that the Lib/Dems were desperate for
    Liquidity is when you look at your investment portfolio and **** your pants
  • jakes_2jakes_2 Forumite
    2 Posts
    But I thought if you made a really large gain, then that can be added to your income for the purposes of deciding the CGT rate?
  • edited 22 June 2010 at 3:51PM
    ladyruskinladyruskin Forumite
    5 Posts
    edited 22 June 2010 at 3:51PM
    I am in the process of selling my second home. It used to be my primary residence but I haven't lived there for the past 8 years. It has been rented out for most of that time and is on a buy to let mortgage.


    I agreed the sale price for the property last week in writing. Can anyone tell me if I pay the capital gains tax at the point I agreed the price or when I complete? i.e. when I agreed the price in writing last week at 18% or this week at 28%!


    Thanks in advance.
  • edited 22 June 2010 at 4:02PM
    uk1uk1 Forumite
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    edited 22 June 2010 at 4:02PM
    Stavros wrote: »
    The thread title is misleading. It is only rising to 28% for higher rate earners. It is not changing for basic rate tax payers, plus the annual exemption allowance is not changing, something that the Lib/Dems were desperate for
    General description of the measure
    2. Legislation will be included in Finance Bill 2010 to introduce a new rate of
    CGT of 28 per cent. For individuals, the rate of CGT remains 18 per cent
    where total taxable gains and income are less than the upper limit of the
    income tax basic rate band. The 28 per cent rate applies to gains (or any
    parts of gains) above that limit. For trustees and personal representatives
    of deceased persons, the rate is increased to 28 per cent (previously
    18 per cent).



    The statement was misleading. The chancellor said that low and middle income tax payers will continue to pay 18%. As the gain is added to income and then adjusted for annual CGT allowances - most people disposing of a long held second homes will be paying some of the gain at 28%. So much for the promise to be "straight" with the budget.
  • John_PierpointJohn_Pierpoint Forumite
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    Exchange of contracts.

    Also search this part of the forum for "letting allowance" and "last three years" for additional relief against CGT.
  • JamesUJamesU Forumite
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    uk1 wrote: »
    As the gain is added to income and then adjusted for annual CGT allowances - most people disposing of a long held second homes will be paying some of the gain at 28%. So much for the promise to be "straight" with the budget.

    Do you have a link to confirm this is how CGT will now be calculated?

    JamesU
  • edited 22 June 2010 at 4:12PM
    uk1uk1 Forumite
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    edited 22 June 2010 at 4:12PM
    JamesU wrote: »
    Do you have a link to confirm this is how CGT will now be calculated?

    JamesU


    It all on the Treasury site in the June Budget Notes document.

    eg:
    11. In working out the CGT payable, taxpayers will be able to deduct losses
    and the AEA in the way which minimises the tax due.
    Example 1
    In 2010-11 X’s taxable income, after all allowable deductions and the
    personal allowance, is £27,400. The upper limit of the income tax basic
    rate band is £37,400. X sells an asset in May 2010 and realises a
    chargeable gain of £17,000. In November 2010 X sells another asset,
    realising a chargeable gain £25,100. X has no allowable losses to set
    against these gains, and the AEA for 2010-11 is £10,100. Neither of the
    gains qualifies for entrepreneurs’ relief.
    X’s taxable income is £10,000 less than the upper limit of the basic rate
    band (£37,400 - £27,400). X sets the AEA against the later gain (because
    part of that gain is liable to tax at the higher CGT rate), leaving £15,000
    taxable (£25,100 – £10,100). The first £10,000 of the £15,000 is taxed at
    18 per cent and the remaining £5,000 is taxed at 28 per cent. The
    £17,000 chargeable gain X realised in May 2010 before the change of
    rates on 23 June 2010 is taxable at the old 18 per cent rate.
  • uk1uk1 Forumite
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    ....... p.s.

    I'm angry. I did the right thing and saved for my old age when the government decimated pensions.
  • Stavros_3Stavros_3 Forumite
    1.3K Posts
    Don't forget you have £10,100 each year that is exempt, so a modest portfolio held for 5+ yrs will have a lot of protected profits
    Liquidity is when you look at your investment portfolio and **** your pants
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