Steve Johnston

Steve_Johnston

Hi,
I,m new to the site.

My age is almost 63, and am looking and preparing to retire.
I still have approx 3 years before I receive the state pension + works pension.

To enable me to fund the next 3 years, I would like clarification how the best way to fund the next 3 years.
I would aim for £30,000 annual income.
I have a modest unit trust fund and share portfolio.
If I was to draw on my funds £11,700 and kept within the Capital Gains Allowance (Annual Exempt Amount)
Also drawing on additional funds and kept within the Personal Allowance £11,850.
The figure between £23550 - £30000 could be made up with dividends from shares/funds.
Am I correct that only 20% tax would be liable on the £23550 - £30,000 ?

Steve

drumtochty

You will pay capital gains tax when you make gains of £11.7k per year in 2018 / 2019. Let's make it easy here.


If you invested £30k say 5 years ago and that is now worth a total of £39k. If you then take £13k for the next three years to part fund your gap years.


The calculation if this year would be £13,000 less the £10,000 you invested that is a £3,000 gain, well below the £11,700 capital gains allowance for 2018 2019.


With regards to dividends this year, you could take £11,850 plus your dividend allowance of £2,000 that is £13,850 this year and £14,500 next year assuming no emergency Brexit budget in 2019 and no other income in these two years.


If the shares are in a stocks and shares ISA then that protects the dividends and the capital gains from taxation.

Linton

You have not told us how much you have in capital growth and dividend paying shares/funds. However with a bit of care you may well be able to avoid paying any tax at all. For a start, CGT is only payable on the profits, not the whole proceeds of a sale. So if you had £30k in a fund which you had bought for £19k then your profit is £11k which is within the tax allowance. So a sale of the fund would not give rise to any tax.

Next, the dividends. Put all your dividend paying investments in an S&S ISA, then they are tax free. You should have done this a few years ago in preparation for your retirement.

Dazed_and_confused

Am I correct that only 20% tax would be liable on the £23550 - £30,000 ?

It all depends on where you are resident for tax purposes and what type of income falls to be taxed.

Assuming you don't move into higher rates then it could be taxed at a variety of different rates,
0%, 0%, 0%, 7.5%, 19%, 20%, 20%, or 21%.

Marcon

How 'modest' is modest - enough to provide £90,000 over the next 3 years, or are you expecting serious growth on some of your assets?

kidmugsy

Mr Johnston:

(1) Where it said "title" it didn't mean your name, it meant a title for your post. Something like "Bridging the Gap", say.

(2) I urge you not to use your real name online (if that is your real name). Too many crooks!