Investments not in an ISA

Aceace

eskbanker said:
...

No, CGT and income tax are unrelated, so not paying the latter has no effect on your liability for the former, and vice versa.

Is that completely true? My understanding was that if the capital gain, when added to your income, pushes you into the higher rate income tax bracket, that part of the gain over the higher rate threshold is liable to CGT at the higher CGT rate. If so, then they are interrelated. 

VXman

Aceace said:

eskbanker said:
...

No, CGT and income tax are unrelated, so not paying the latter has no effect on your liability for the former, and vice versa.

Is that completely true? My understanding was that if the capital gain, when added to your income, pushes you into the higher rate income tax bracket, that part of the gain over the higher rate threshold is liable to CGT at the higher CGT rate. If so, then they are interrelated. 

My situation is that my income in 2020-21 is so low I will pay no income tax. Lets say I made £10,000 profit from selling investments. Not enough for CGT but do I have to declare it as income causing me to enter the basic 20% tax bracket.

snowqueen555

Linton said:

Yes to all 3 questions:
If you sell an investment at a profit you have made a capital gain which is potentially liable to CGT if not in a pension or ISA.
You don’t have to declare a capital gain to HMRC if it is within your allowance unless they ask you.
You can arrange the sale of investments to minimise CGT. You would be foolish not to.

If you make a loss can you subtract those against the gains?

Aceace

VXman said:

Aceace said:

eskbanker said:
...

No, CGT and income tax are unrelated, so not paying the latter has no effect on your liability for the former, and vice versa.

Is that completely true? My understanding was that if the capital gain, when added to your income, pushes you into the higher rate income tax bracket, that part of the gain over the higher rate threshold is liable to CGT at the higher CGT rate. If so, then they are interrelated. 

My situation is that my income in 2020-21 is so low I will pay no income tax. Lets say I made £10,000 profit from selling investments. Not enough for CGT but do I have to declare it as income causing me to enter the basic 20% tax bracket.

Sorry @VXman, I was simply trying to check whether my understanding about whether CGT and income tax are sometimes related.
I think the following from https://www.gov.uk/capital-gains-tax/work-out-need-to-pay should give you the answer to your question: 

If your total gains are less than the tax-free allowance
You do not have to pay tax if your total taxable gains are under your Capital Gains Tax allowance.
You still need to report your gains in your tax return if both of the following apply:

• the total amount you sold the assets for was more than 4 times your allowance

• you’re registered for Self Assessment

eskbanker

Aceace said:

eskbanker said:
...

No, CGT and income tax are unrelated, so not paying the latter has no effect on your liability for the former, and vice versa.

Is that completely true? My understanding was that if the capital gain, when added to your income, pushes you into the higher rate income tax bracket, that part of the gain over the higher rate threshold is liable to CGT at the higher CGT rate. If so, then they are interrelated. 

Sorry, yes, you're right, my comment should have been clearer that it was about the specific context being discussed.

DennisTenus

eskbanker said:

Aceace said:

eskbanker said:
...

No, CGT and income tax are unrelated, so not paying the latter has no effect on your liability for the former, and vice versa.

Is that completely true? My understanding was that if the capital gain, when added to your income, pushes you into the higher rate income tax bracket, that part of the gain over the higher rate threshold is liable to CGT at the higher CGT rate. If so, then they are interrelated. 

Sorry, yes, you're right, my comment should have been clearer that it was about the specific context being discussed.

Do you mean in terms of the  CGT 10% for basic income tax band and 20% higher rate income tax band?

bowlhead99

DennisTenus said:

eskbanker said:

Aceace said:

eskbanker said:
...

No, CGT and income tax are unrelated, so not paying the latter has no effect on your liability for the former, and vice versa.

Is that completely true? My understanding was that if the capital gain, when added to your income, pushes you into the higher rate income tax bracket, that part of the gain over the higher rate threshold is liable to CGT at the higher CGT rate. If so, then they are interrelated. 

Sorry, yes, you're right, my comment should have been clearer that it was about the specific context being discussed.

Do you mean in terms of the  CGT 10% for basic income tax band and 20% higher rate income tax band?

VXman's situation was that he didn't have enough income to need to pay any income tax and was wondering if making some gains (e.g. £10k of gains which is covered by the annual gains exemption) would in any case drag him into paying income tax despite being exempt for capital gains tax. The answer is that they will not, as gains do not affect your income tax, regardless of whether they are covered or not covered by exemption for CGT. Simply, they are two different tax regimes and the income tax man doesn't care about your capital activities which are covered by the chargeable gains act, a different set of rules.

However, the other way around, your level of income can affect the rate at which you pay capital gains tax (though not the amount of gains on which you pay it), because capital gains (after taking off the exemption and allowable losses) are chargeable at a rate that is determined by whether you have any space in your basic rate income tax band. 

After you take off the annual exemption and allowable losses, if you have some unused space in your basic rate income tax band you will only need to pay CGT on it at 10% (for shares and investment funds and most other things) or 18% (for property) on that amount of the gain. While on the part of the gains that would take you above the higher rate threshold  - i.e. all of it in the case of a higher rate income taxpayer or perhaps some of it for basic or nil rate income tax payers -  you would pay 20% (shares etc) or 28% (property).

VXman

bowlhead99 said:

DennisTenus said:

eskbanker said:

Aceace said:

eskbanker said:
...

No, CGT and income tax are unrelated, so not paying the latter has no effect on your liability for the former, and vice versa.

Is that completely true? My understanding was that if the capital gain, when added to your income, pushes you into the higher rate income tax bracket, that part of the gain over the higher rate threshold is liable to CGT at the higher CGT rate. If so, then they are interrelated. 

Sorry, yes, you're right, my comment should have been clearer that it was about the specific context being discussed.

Do you mean in terms of the  CGT 10% for basic income tax band and 20% higher rate income tax band?

VXman's situation was that he didn't have enough income to need to pay any income tax and was wondering if making some gains (e.g. £10k of gains which is covered by the annual gains exemption) would in any case drag him into paying income tax despite being exempt for capital gains tax. The answer is that they will not, as gains do not affect your income tax, regardless of whether they are covered or not covered by exemption for CGT. Simply, they are two different tax regimes and the income tax man doesn't care about your capital activities which are covered by the chargeable gains act, a different set of rules.

However, the other way around, your level of income can affect the rate at which you pay capital gains tax (though not the amount of gains on which you pay it), because capital gains (after taking off the exemption and allowable losses) are chargeable at a rate that is determined by whether you have any space in your basic rate income tax band. 

After you take off the annual exemption and allowable losses, if you have some unused space in your basic rate income tax band you will only need to pay CGT on it at 10% (for shares and investment funds and most other things) or 18% (for property) on that amount of the gain. While on the part of the gains that would take you above the higher rate threshold  - i.e. all of it in the case of a higher rate income taxpayer or perhaps some of it for basic or nil rate income tax payers -  you would pay 20% (shares etc) or 28% (property).

I thanked you but reading that does hurt my head a little - I think I understand 

DennisTenus

I'm kicking myself that I didn't just invest in a non ISA account (because I'd used my ISA allowance up) when there was the correction earlier on this year. I didn't realise/forgot about my CGT allowance.

bowlhead99

DennisTenus said:

I'm kicking myself that I didn't just invest in a non ISA account (because I'd used my ISA allowance up) when there was the correction earlier on this year. I didn't realise/forgot about my CGT allowance.

Well, whether there is a CGT allowance or not, it's nicer to make a nice gain and pay 10-20% tax on it than not to make the gain and 'avoid tax'