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Tax on shares

Hi!
I've always had a stocks and shares ISA so have never had to worry about this. At the moment I'm thinking about whether to expand my investments outwith the £20k limit and buy normal, non-ISA shares as well.

I'm a higher-rate tax-payer and I understand I get £11,300 of tax-free profit per year from any capital gains from shares, after which I am taxed at 20% individual capital gains tax.

My questions:

1. Do I have to pay 40% income tax on top of individual capital gains tax?

2. Can I set up a limited company and invest in shares via this company, if so, is it more tax efficient?

Thanks everyone! :)
«1

Comments

  • jimjames
    jimjames Posts: 18,723 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    1. Income tax isn't payable on capital gains.

    2. A company probably isn't worthwhile as you get no CGT allowance

    The tax is only paid on gains and is per year. So you can sell shares to cover the allowance each year which could be enough to cover gains unless you are very fortunate.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • soulsaver
    soulsaver Posts: 6,641 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 12 December 2017 at 2:39PM
    Hi!


    ... I understand I get£11,300 of tax-free profit per year from any capital gains from shares....

    FTAOD - ...£11,300 of tax-free profit per year from any capital gains.... full stop.
    So including asset disposals for example - BTL property, works of art, fine wine, krugerands .. etc with some exceptions in certain circumstances... :)
  • Thanks!

    Relief to hear that I don't need to pay 40% on top of 20% individual capital gains tax, and that I have a tax free allowance!
    I'm considering withdrawing money from my mortgage as it's only at 1.09%, why not make it work a bit harder!
  • With a bit of careful selling you should be able to avoid tax altogether using your annual allowances. Between us we have taken around £80k of gains out of our non ISA investments over the last 5 years without paying any tax. If you are married split the investment and make use of two lots of allowance.
  • If you hold your non ISA shares for long enough to get a dividend you will also be able to benefit from the first £5000 (£2000 next tax year) being taxed at a 0% tax rate.

    But sometimes you can have more tax to pay because of the dividend income even though the dividends themselves are taxed at 0%.

    Higher rate payers are more likely to suffer from this, particularly if you are in scope for the high income child benefit charge or have income in excess of £100,000
  • I am trying to construct a spreadsheet to work out potential CGT liability and need to get the basics right. I hold shares in a joint nominee account so do the following principles apply
    a) Buying prices for multiple purchases of the same share are worked out as average of currently held stock (at time of each sell)?
    b) Total gains end of year are applied equally to joint holder?
    c) Gains are effectively added to each joint holders other income for the relevant year and taxed at 10p in the pound up to a total income of £45k and 20p over that.
    The bit I am not sure of is , is the CGT allowance excluded from these calculations or is it counted as part of the total income calculation?
  • System
    System Posts: 178,353 Community Admin
    10,000 Posts Photogenic Name Dropper
    Gains are not taxed as income! They are taxed as gains: https://www.gov.uk/capital-gains-tax
    This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com
  • OPENSPACES
    OPENSPACES Posts: 49 Forumite
    edited 19 December 2017 at 2:43PM
    OK but at what stage do you move from paying 10p to 20p. The former is stated as being for basic rate payers but does there not come a time when your ordinary income plus CGT gains takes you over the lower limit and into the higher banding ?

    PS the HMRC web site indicates that CGT does get added to your taxable other income for banding purposes viz

    If this amount (Capital Gain plus taxable income) is within the basic Income Tax band (up to £45K) you’ll pay 10% on your gains. You’ll pay 20% on any amount above this.
  • soulsaver wrote: »
    FTAOD - ...£11,300 of tax-free profit per year from any capital gains.... full stop.
    So including asset disposals for example - BTL property, works of art, fine wine, krugerands .. etc with some exceptions in certain circumstances... :)
    You forgot bitcoins :D
  • Biggles
    Biggles Posts: 8,209 Forumite
    1,000 Posts Combo Breaker
    I've always had a stocks and shares ISA so have never had to worry about this. At the moment I'm thinking about whether to expand my investments outwith the £20k limit and buy normal, non-ISA shares as well.
    ISA shares are (in most cases) 'normal' shares. Why not wait till 6 April, add another £20k to your ISA and buy some more within your ISA?
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