Stocks/ Shares qn. Tax allowance , Please help

dino-c

Hello,

I was looking for information on paying tax on investment in stocks, ISA. Please could you have a read through and if you have any information on this question, please could you reply. I appreciate your time greatly and I thank you for your valuable time spend on this query.

Summary:

Husband & wife are UK resident and husband is on a 40% tax bracket as he is earning above 40K. Wife is a homemaker and haven’t worked in UK. From my wife household saving money through years, she carefully invests in US stocks through UK bank.

Since my wife is not working in UK, she could able to earn tax free until 8000£ if I am not wrong. And after that anyone earning above 8000£ app. will need to pay capital gain tax like 20% or 40% based on the profit they earn every tax year if I am not wrong. We are new to this investing and require some advice on UK rules.

Questions:

1. How much money upto she is entitled tax free. (She is a housewife and not employed)

2. If she earns some money through stocks before 1st of April 2013, by when she need to declare her profits to UK tax office (Month and Year)

3. If in case we had a loss in investing OR if its within her tax free limit (8000£), does she still need to declare to UK tax office that she had a loss.

4. Does she need to declare only the profits (above 8000£) or does she need to run through the entire statements from 0£-8000+£ explaining how she got the profits

5. Is there any standard forms to submit to UK tax office or do we need to ring up the tax office and explain just the profits and they will do the calculation?


- I came across an article in which it says

The ISA limit for 2012/2013 is £11,280. You can invest the full amount into stocks.
Stocks and shares ISA: this gives you the chance to invest your money in equities, bonds or commercial property without paying personal tax on any returns you might make.

6. Does the above statement says, that I can invest upto 11,280£ from my earning each year into stocks and If I make profit (no matter how much money from that 11,280), I don’t need to declare and pay tax.

7. Just as an example, if I (husband earning above 40K) invest 10,000£ from his savings this march 2013 and by end of the year it tripled and became 30,000£, I don’t need to pay any tax on this amount, isn't it? (ISA allowed upto 11,280£, I am within the limit)???

8. Another one example, say my wife invested 8000 £ this year and she made a profit of 20,000 £ by end of this year, so total would be 20000+8000£ and if she withdraws the whole amount 28000 and transfer to local UK bank account for instance.

8A) She will be end up paying tax on that profit 20,000 £ (20% of 20,000), isn't it? (4000£ need to paid for tax) and finally she will be having 8000£+16000£ = 24000£

8B) Next year she invests the remaining amount (24,000£) in stocks, is she allowed to invest tax free of 11,280£ (ISA) as well and the profit made on that doesn't need to declared? So she will need to declare only profits made on (24000-11280=) 12720£. Isn't it?

I appreciate your time greatly for replying to this. I want to pay the tax correctly and i don’t know where to get these information’s, hence I am emailing here to get your valued feedbacks. So please if you have came across these issues previously please could you reply to the above questions.

Thanks a lot.

Dino

Linton

dino-c wrote: »

Hello,

I was looking for information on paying tax on investment in stocks, ISA. Please could you have a read through and if you have any information on this question, please could you reply. I appreciate your time greatly and I thank you for your valuable time spend on this query.

Summary:

Husband & wife are UK resident and husband is on a 40% tax bracket as he is earning above 40K. Wife is a homemaker and haven’t worked in UK. From my wife household saving money through years, she carefully invests in US stocks through UK bank.

Since my wife is not working in UK, she could able to earn tax free until 8000£ if I am not wrong. And after that anyone earning above 8000£ app. will need to pay capital gain tax like 20% or 40% based on the profit they earn every tax year if I am not wrong. We are new to this investing and require some advice on UK rules.

Questions: Note 2012-2013 figures

1. How much money upto she is entitled tax free. (She is a housewife and not employed) 8105 income and 10600 capital gains

2. If she earns some money through stocks before 1st of April 2013, by when she need to declare her profits to UK tax office (Month and Year) October 2013 paper, january 2014 online

3. If in case we had a loss in investing OR if its within her tax free limit (8000£), does she still need to declare to UK tax office that she had a loss. She doesnt need to unless the tax office want her to fill in a self assessment tax return which they almost certainly wont.

4. Does she need to declare only the profits (above 8000£) or does she need to run through the entire statements from 0£-8000+£ explaining how she got the profits If she has to fill in a self assessment form and the shares are not held in an ISA she would have to provide details.

5. Is there any standard forms to submit to UK tax office or do we need to ring up the tax office and explain just the profits and they will do the calculation? In simple cases such as your wife's ring up the tax office if you believe she will have to pay tax.


- I came across an article in which it says

The ISA limit for 2012/2013 is £11,280. You can invest the full amount into stocks.
Stocks and shares ISA: this gives you the chance to invest your money in equities, bonds or commercial property without paying personal tax on any returns you might make.

6. Does the above statement says, that I can invest upto 11,280£ from my earning each year into stocks and If I make profit (no matter how much money from that 11,280), I don’t need to declare and pay tax. Correct and so can your wife - so you give her £11280 and between you £22560 is protected per year in an ISA.

7. Just as an example, if I (husband earning above 40K) invest 10,000£ from his savings this march 2013 and by end of the year it tripled and became 30,000£, I don’t need to pay any tax on this amount, isn't it? (ISA allowed upto 11,280£, I am within the limit)??? Correct

8. Another one example, say my wife invested 8000 £ this year and she made a profit of 20,000 £ by end of this year, so total would be 20000+8000£ and if she withdraws the whole amount 28000 and transfer to local UK bank account for instance.

8A) She will be end up paying tax on that profit 20,000 £ (20% of 20,000), isn't it? (4000£ need to paid for tax) and finally she will be having 8000£+16000£ = 24000£ If the profit is made in an ISA there is no tax. If it is not there is a capital gains tax free allowance of £10600. Note that you only make a profit if you sell the shares. There is no tax to be paid if the shares increase in value but you dont sell..

8B) Next year she invests the remaining amount (24,000£) in stocks, is she allowed to invest tax free of 11,280£ (ISA) as well and the profit made on that doesn't need to declared? So she will need to declare only profits made on (24000-11280=) 12720£. Isn't it? If the shares/money never leave the ISA you can add another £11280 next year. Profits made in an ISA never need to be declared which is one of the main advantages of an ISA as you would need to be a reasonably big investor to make taxable profits anyway.

I appreciate your time greatly for replying to this. I want to pay the tax correctly and i don’t know where to get these information’s, hence I am emailing here to get your valued feedbacks. So please if you have came across these issues previously please could you reply to the above questions.

Thanks a lot.

Dino

Hope this helps

Linton

To avoid confusion - an ISA is a special account which you will have to acquire from one of the many online brokers. Unless you make your profits within an ISA they wont be protected beyond the tax free limit.

dino-c

Thanks Linton for your comments and your valuable time.