Tax on Profits.

RolandFlagg

Question about tax on investments. On investments you have outside of your tax free wrappers (ISA/SIPP), if you are retired/have no official income then do you only get taxed on profits only once you have used your personal allowance AND capital gains tax allowance? 
Thanks.

underground99

How you get taxed on 'profits' depends on what the profits from the investments are. 

If you receive dividend income it would be taxed once you have used your income tax personal allowance and dividend allowance.

If you receive interest income it would be taxed once you have used your income tax personal allowance and the 0% starter rate for savings (if you have any of it available) and your personal savings interest allowance.

If you receive property income distributions it would be taxed once you have used your income tax personal allowance.

If you receive capital gains (the proceeds of selling shares exceed the cost of buying them) it would be taxed once you have used your capital gains tax exemption.

lozzy1965

Retirement has nothing to do with tax.  It is your total income that matters.  Capital gains allowance comes into play if you make profit from selling assets.  Your taxable capital gain (after the tax free part has been deducted) gets added to your income.  So you are correct.
Edit:  Removed this incorrect part of my post.  Thanks to underground99 for the edification. 

underground99

lozzy1965 said:

Retirement has nothing to do with tax.  It is your total income that matters.  Capital gains allowance comes into play if you make profit from selling assets.  Your taxable capital gain (after the tax free part has been deducted) gets added to your income.  So you are correct.

It only gets added to income for the purpose of checking what rate of capital gains tax is charged on the gain made (either 10% CGT for basic rate tax payers or 20% CGT for higher rate taxpayers on investment gains made on shares, for example).

If the OP thinks he would only need to pay tax on the amount of gain that exceeds the CGT exemption AND the income tax personal allowance, he's incorrect. For example, if he doesn't have much income he might have a large amount of unused income tax personal allowance but still need to be paying capital gains tax on any gains that exceed his capital gains tax annual exemption.