Capital Gain & Employment

nealnomoney

Hi hope some1 can help,

If i sell a house and have a capital gain, do i add the gain to my employment income and then tax it through the bands ie. 10% 22% & 40% or do i just keep it seperate altogether??

hollyblue

I think it remains separate as you already have a tax free element of your earnings and anything above that you've already paid tax on.

You also get a CGT free element as well around £8 or 9k I think.

I'm sure someone will give you a proper answer soon though!

nealnomoney

Yeh its 9200 for this 06/07. I Just want to know if i add both together and then tax them and would i have to fill out employment pages on a tax return as well as a capital gains tax form?

Thanks!

ShoesAreDamnExpensive

and the tax man will work it out for you!

Net gains are added to total other taxable income to determine the rate applicable (net gains being the point here - so don't forget to deduct your annual capital gains exemption - £8,800 for 2006/07 and any taper relief)

The rates of tax for CGT are 10%, 20% and 40% (note - no 22% - if your gain falls within the basic rate band it is taxed at 20% not 22%).

You will need to complete a tax return and the return ahs to show ALL sources of income not just the capital gain. Now where di you put that statement showing the 2p bank interest.....

Swishter

If you live in the house as your main home you don't need to pay gains at all.

You do get tax allowances and there are also tapers for inflation, it then falls into the bands as ShoesAreDamnExpensive says.

The best (and free) option I know about is to visit you local tax office and ask them, also getting them to put it in writing. From what I understand if they tell you the wrong info you can't be held liable for any mistake wheras you could be liable if an accountant, for example, provided that information.

ShoesAreDamnExpensive

but don't count on anything other than a basic leaflet in writing from the tax man. Someone in a local office may well help you run through the calculation verbally.

The days of self assessment mean that HMRC no longer have to give upfront calculations in writing. Many simply refuse to do so as it shifts the onus onto them. However, as long as you submit your return by 30 Septemeber they have to tell you the amount to pay by 31 January so if you think your own calculation may be a bit iffy submit your return as soon as you can as it gives you more time.

As Swishter says if you live in the house as your only or main property or have ever lived in the house as your only or main property you will be entitled to principal private residence relief which will reduce the gain (depending on how long it was your PPR it can reduce it to nil)