Are asset sales subject to CGT & Income Tax?

scrooge1985

I've tried looking for this answer on the HMRC website and through the forums but can't see an obvious answer...

If you sell an asset which is under your annual CGT allowance (eg a share sale) is this classed as part of your annual income - therefore subject to income tax and also taken into account as income in tax credit calculations?

Furthermore, if the answer to the above is yes - if the asset sale takes you over the annual CGT allowance are you subject to CGT AND income tax on the sale proceeds?

Never been fortunate to have been in this position before!!

Hopefully I'm just getting confused between all the media coverage about CGT possibly being related to your income tax band and that the two taxes are totally seperate!!!

Thanks in advance.

yelf

No -its a gain and so is taxed under CGT not income.

ceeforcat

I trust that you are aware that your GAIN on the asset, not the sale proceeds, that counts. I so, I apologise for mentioning this.

TM1976

It's now linked to income but you can make a gain of £10,100 tax free, if you have basic rate band available you pay tax at 18% on this and 28% thereafter.

Mikeyorks

scrooge1985 wrote: »

Hopefully I'm just getting confused between all the media coverage about CGT possibly being related to your income tax band and that the two taxes are totally seperate!!!

They were essentially separate up to the emergency Budget (22nd June) ..... but now have definite links. So it depends on the disposal date of the asset?

Tentatively - disposed of up to 22/6 then it's 18% CGT for gains over your annual allowance (£10.1k)

If after that date - more complex. Total your gains and subtract the £10.1k allowance. No CGT tax due if the result is zero or negative ....... but you may have to make a CGT Return if the disposal total (not the gain - but the total you sold the asset for less any relevant costs) is 4 x the allowance (ie £40,400 or more).

If the result is positive ....... you add the gain to your taxable income (income less personal allowance) and will pay 28% CGT on any part of the gain above £37400 (the ceiling of the IT 20% band). And 18% CGT on any part of the gain that falls below £37400.

Quick example with easy arithmetic. Personal allowance £6475. PAYE income for the year £36475. CGT gain £30100.

CGT gain £30,100 less allowance £10,100 = £20,000 net gain.
Income £36,475 less £6,475 PA = £30,000
Total taxable income = £30k (IT)+ £20k (CGT) = £50k
CGT tax due is (£7,400 @ 18%) + (£12,600 @ 28%)

Income Tax is used in the calculation to determine overall taxable income (and therefore the CGT rate) - but otherwise the Income Tax remains as is from your PAYE (or SA).