Tax after retirement

Earl_Tucker

Hello all,
Forgive me for an extremely ignorant question from someone who has been out of UK for a  long time, living in a place with a very straightorward tax code!

We would like to return to the UK, and maybe retire. Estimated income would be 10000 per annum from rental income and a further 26000 from selling stocks. (Or, that could be 10000 from dividends and 16000 from selling stocks.) That will probably be enough for our needs (once we have bought a house.)

Is it actually possible that we pay no tax on this? Can we use our respective personal allowances alongside dividend allowances, CGT allowance, rental allowances to write off the lot? Seems wrong so I assume I'm missing something (like, are you actually allowed to 'stack' these allowances?)

Any pointers gratefully received!

 

Workerdrone

The key thing here is you don't say if you are married. Lets unpick this a bit.

Presently the basic rate tax threshold on income per person is £12570, any income below that rate is tax free be that from pension or employment

I believe that same rate also applies to income from renting. So assuming you were married. One of you can earn £1047.50 per month on renting out the property to use up your tax free amount.

In terms of tax on dividends that also falls within a persons £12570 personal allowance, so the other person can receive up to that level from their dividends without paying tax. Between the two of you that gets you to £25140 tax free.

The same £12570 tax free threshold would apply if instead of the income coming from dividends it came from the disposal of an asset like selling stocks. But for now lets assume you are going the route of the first person using their whole personal allowance on for the rental income and the second person using it for their dividend allowance.

On top of the above each person has a tax free allowance for capital gains of £12300. Remember this is the amount of gain you have made on the asset. Not just the sale price. You need to deduct the price you bought the asset for from your sale price to work out if you have breached this amount.

Now back to the point on being married. Assets can be transferred between husband and wife (Or civil partners) in a tax free manner. Even if you held all the assets you could still transfer assets with £12300 of profit to your partner (married/civill) per year and they could dispose of them tax free. You could also do the same.

if you were able to use all the techniques above you could liberate a tax free income of £49740.

The situation on NI is more complex, but generally if its a single property you are letting out rather than as part of a business you would not be expected to pay class 4 NI on it.

Im sure someone will be along shortly to improve/correct on any errors or omissions I have made.

Workerdrone

Oh and don't worry about it seeming wrong. The government will still rob you blind at the petrol pumps, with council tax, insurance tax, vehicle excise duty, VAT, tax on alcohol, tobacco, inheritance tax, oxygen tax etc.

P.S That last one is a joke... for the moment.

Dazed_and_C0nfused

There is no "we" with tax and there is no "allowance" for dividends, they are all taxable although the first £2,000 are taxed at a 0%.

You need to clarify how much of each type of income/gain each person is receiving.

Earl_Tucker

Thank you! That really helps to confirm most of what I thought (amd Workerdrone, yes, I am aware that I am constantly paying tax elsewhere!) I've obviously misunderstood the 'dividend allowance' thing - I thought the first 2000 was an allowance.

Workerdrone

Dazed_and_C0nfused said:

There is no "we" with tax and there is no "allowance" for dividends, they are all taxable although the first £2,000 are taxed at a 0%.

You need to clarify how much of each type of income/gain each person is receiving.

Apologies I misled you on the dividend element. Good to
learn these things