CGT Limit on Investments... pay into SIPP to avoid tax?

hennerz

I've made more than the 11k capital gains allowance this year, so will trigger a tax payment at 20% on the profits above this amount.

Is it possible to pay an amount equal to the profits into a SIPP account and then not pay any tax? Much like someone with a £16k income could get £11k tax free, then put the £5k into a SIPP and pay no tax.

I have no taxable income, so my current SIPP allowance is just £2,880.

Dazed_and_confused

Much like someone with a £16k income could get £11k tax free, then put the £5k into a SIPP and pay no tax

How does this work, are you talking about salary/wages/business profits or some other more unusual type of income?

If you have 16k income and the 11k tax allowance then won't you have £1000 tax to pay?:o

hennerz

Dazed_and_confused wrote: »

Much like someone with a £16k income could get £11k tax free, then put the £5k into a SIPP and pay no tax

How does this work, are you talking about salary/wages/business profits or some other more unusual type of income?

If you have 16k income and the 11k tax allowance then won't you have £1000 tax to pay?:o

Ah, I think I may have misunderstood.

The person with 16k may just pay 1k tax, pay 4k into a pension, then get the 20% boost from the govt = 1k. Effectively getting the tax back? Maybe this is what I read previously. Although they would then be taxed in the future at their marginal rate when accessing the SIPP money.

kidmugsy

hennerz wrote: »

I've made more than the 11k capital gains allowance this year, so will trigger a tax payment at 20% on the profits above this amount.

I thought the CGT rates were 18% and 28%, depending on interaction with income exposed to income tax rates of 20% and 40%. (That's for gains in 2015-16).

http://www.taxcafe.co.uk/resources/cgt_basicrateplanning.html

kidmugsy

If by "this year" you mean 2016-17 then you face rates of 10% or 20%. Presumably you should calculate your liability by adapting the calculation in the link I gave you.

hennerz

kidmugsy wrote: »

I thought the CGT rates were 18% and 28%, depending on interaction with income exposed to income tax rates of 20% and 40%. (That's for gains in 2015-16).

http://www.taxcafe.co.uk/resources/cgt_basicrateplanning.html

kidmugsy wrote: »

If by "this year" you mean 2016-17 then you face rates of 10% or 20%. Presumably you should calculate your liability by adapting the calculation in the link I gave you.

Thanks, as it will keep my income below the basic income tax band, it looks like I will only pay 10% on the gains. Indeed I am discussing 16-17 tax year.


Say the gain is £21,100, so £10k above the CGT allowance, would my SIPP allowance be £10k also (the amount I earned that year)? Or £9k (after the 10% tax)? Or even £21.1k (total gains)? Or am I still seen as a non-earner as I pay no income tax?

[Deleted User]

Maybe I am missing something here - surely capital gains is not regarded as earnings?

You can put up to the amount of relevant earnings into a pension. Relevant earnings includes salary, bonuses, Self-employed profits but not interest on investments or capital gains.

kidmugsy

[Deleted User] wrote:

Maybe I am missing something here - surely capital gains is not regarded as earnings?

That's my understanding too.

Freecall

hennerz wrote: »

I've made more than the 11k capital gains allowance this year, so will trigger a tax payment at 20% on the profits above this amount.

To be clear, have you already crystalized those gains in the current tax year?

If you have then presumably you had a good reason for doing so. If not then why not split the gains over 2 years?

hennerz

Freecall wrote: »

To be clear, have you already crystalized those gains in the current tax year?

If you have then presumably you had a good reason for doing so. If not then why not split the gains over 2 years?

I switch most funds each month, so the gains are crystallised...although obviously there are still 7+ months to make loses that may bring me back below the CGT allowance.


On another note, when submitting my Self Assessment, if changing funds each month, do I have to list all the gains and all the losses e.g. every fund that I had and it's gain and every fund I had and it's loss? Or can I just submit that my unwrapped investments made a gain of X?

[Deleted User]

hennerz wrote: »

I switch most funds each month, so the gains are crystallised...although obviously there are still 7+ months to make loses that may bring me back below the CGT allowance.


On another note, when submitting my Self Assessment, if changing funds each month, do I have to list all the gains and all the losses e.g. every fund that I had and it's gain and every fund I had and it's loss? Or can I just submit that my unwrapped investments made a gain of X?

If the proceeds throughout the year are less than£44400 AND there results in gains less than £11100 you do not even need to declare them.

I would repeat my earlier point that Capital Gains are not pensionable earnings.