capital gains tax on share sales if under basic rate threshold

merlin777

My income is below the basic rate tax allowance. I want to sell some shares which will give me a profit above the £10,900 CGT allowance.

What rate of CGT would have to pay?

Thanks!

Ifts

Example one - a simple example

Mr P's total income, after deducting allowances and reliefs, is £20,000 and his capital gains, after reliefs, are £14,000.

The basic rate band is £34,370. Mr P has used £20,000 of this amount against his income - so has £14,370 remaining.

As his gains are only £14,000, he has enough of the basic rate band remaining to cover his gains, so they are all to be taxed at 18 per cent. He now deducts his tax-free allowance of £10,600 and pays Capital Gains Tax at 18 per cent on £3,400.

http://www.hmrc.gov.uk/rates/cgt.htm

I want to sell some shares which will give me a profit above the £10,900 CGT allowance.

Can you not sell some now and use up the £10,900 2013/14 CGT allowance and the rest using next tax years (2014/15) CGT allowance.
Also if possible you can transfers some shares into a spouses name and then use their CGT allowance.

merlin777

I'm not quite clear from the example. Does this mean you treat profit from shares as normal income until you reach the basic rate threshold and then the excess is subjest to CGT?

So for instance, if my normal income is £6k and my personal allowances total £8k then I can earn £2k plus £10,900 in profit from shares before paying any cgt at all?

Ifts wrote: »

http://www.hmrc.gov.uk/rates/cgt.htm



Can you not sell some now and use up the £10,900 2013/14 CGT allowance and the rest using next tax years (2014/15) CGT allowance.
Also if possible you can transfers some shares into a spouses name and then use their CGT allowance.

grey_gym_sock

merlin777 wrote: »

So for instance, if my normal income is £6k and my personal allowances total £8k then I can earn £2k plus £10,900 in profit from shares before paying any cgt at all?

no, the personal allowance can only be set against income, not capital gains. (just as the CGT allowance can only be set against capital gains, not income.)

so gains over £10,900 are taxed at 18% (unless the gains are big enough to use up the whole basic rate band, at which point it goes up to 28%).

grizzly1911

merlin777 wrote: »

I'm not quite clear from the example. Does this mean you treat profit from shares as normal income until you reach the basic rate threshold and then the excess is subjest to CGT?

So for instance, if my normal income is £6k and my personal allowances total £8k then I can earn £2k plus £10,900 in profit from shares before paying any cgt at all?

If your normal income is 6k then you are not subject to income tax if your allowance is £8K.

If you made up to £10900 capital gain in the same tax year no CGT would be payable.

CGT rates change once you are liable to become a higher rate tax payer. Whatever rate is applicable the £10900 can be deducted of any gain in the year.

Biggles

merlin777 wrote: »

I'm not quite clear from the example.

Nor was I to begin with. It's actually an HMRC example about which rate of CGT that would be payable, rather than whether or not it would be payable in the first place. In other words, it was answering your question 'What rate would I pay'.

But the advice about selling part now and part after 5 Apr is good. If planned carefully, you need pay nothing.

merlin777

and in retrospect my question was a bit unclear so i was lucky to get such good responses!

What i was thinking was, if upper rate tax payers pay 28% cgt and basic rate tax payers pay 18% cgt i was hoping a 0% taxpayer might get at lease some of it at 0%... wishful thinking really!

Biggles

merlin777 wrote: »

What i was thinking was, if upper rate tax payers pay 28% cgt and basic rate tax payers pay 18% cgt i was hoping a 0% taxpayer might get at lease some of it at 0%... wishful thinking really!

Well, as long as you have total gains of no more than £21,900 (£10,900 for 2013/14, £11,000(est) for 2014/15) and you time your disposals carefully, you get it all at 0%!

merlin777

thanks everyone!