Yet another CGT question 30 May 2022 at 11:08AM in Cutting tax 9 replies 181 views

ouraggie

Hi. I am about to sell a second home. Bought for £120k in 2008, should fetch about £180k now. My question is, if i sell it in ,say, August 2022 i have almost no other income so far in this tax year. However, if i earn anything AFTER I have sold the cottage and paid my CGT bill,  will i need to pay further CGT at some point because of that? 

I hope my question makes sense. I have searched but not found the answer anywhere.

purdyoaten2

You have a Capital Gains allowance of 12300 AND a personal income tax allowance of 12570. If you were to earn more than 12570 after you have submitted your capital gains computation (on the basis that you have no other taxable income) you will pay additional capital gains tax. For example, if you earned 13570, 1000 over the personal allowance, that would mean that 1000 more of the gain should have been taxed at 28% as opposed to 18%, an extra £100 of tax.

NorthYorkie

I wouldn't deliberately avoid generating income this year, you will still be better off!. Sometimes it's better to pay the tax.

diystarter7

Slightly OT but if anyone is gifting NorthYorkie said:

I wouldn't deliberately avoid generating income this year, you will still be better off!. Sometimes it's better to pay the tax.

property to a member of the family etc, do it over two tax years so you get two allowances IMO but check first as i was advised of this by someone I know. 

Keep_pedalling

purdyoaten2 said:

You have a Capital Gains allowance of 12300 AND a personal income tax allowance of 12570. If you were to earn more than 12570 after you have submitted your capital gains computation (on the basis that you have no other taxable income) you will pay additional capital gains tax. For example, if you earned 13570, 1000 over the personal allowance, that would mean that 1000 more of the gain should have been taxed at 28% as opposed to 18%, an extra £100 of tax.

Are you sure about that? The 28% rate is for HR tax payers not basic rate payers.

Jeremy535897

The gain is sufficiently large to use the basic rate band, so if there is any taxable income, that will increase the amount of the capital gain taxable at 28%.

purdyoaten2

Keep_pedalling said:

purdyoaten2 said:

You have a Capital Gains allowance of 12300 AND a personal income tax allowance of 12570. If you were to earn more than 12570 after you have submitted your capital gains computation (on the basis that you have no other taxable income) you will pay additional capital gains tax. For example, if you earned 13570, 1000 over the personal allowance, that would mean that 1000 more of the gain should have been taxed at 28% as opposed to 18%, an extra £100 of tax.

Are you sure about that? The 28% rate is for HR tax payers not basic rate payers.

Yes as Jeremy says - the gain is £60000!

diystarter7

purdyoaten2 said:

Keep_pedalling said:

purdyoaten2 said:

You have a Capital Gains allowance of 12300 AND a personal income tax allowance of 12570. If you were to earn more than 12570 after you have submitted your capital gains computation (on the basis that you have no other taxable income) you will pay additional capital gains tax. For example, if you earned 13570, 1000 over the personal allowance, that would mean that 1000 more of the gain should have been taxed at 28% as opposed to 18%, an extra £100 of tax.

Are you sure about that? The 28% rate is for HR tax payers not basic rate payers.

Yes as Jeremy says - the gain is £60000!

100% spot on.

Keep_pedalling

purdyoaten2 said:

Keep_pedalling said:

purdyoaten2 said:

You have a Capital Gains allowance of 12300 AND a personal income tax allowance of 12570. If you were to earn more than 12570 after you have submitted your capital gains computation (on the basis that you have no other taxable income) you will pay additional capital gains tax. For example, if you earned 13570, 1000 over the personal allowance, that would mean that 1000 more of the gain should have been taxed at 28% as opposed to 18%, an extra £100 of tax.

Are you sure about that? The 28% rate is for HR tax payers not basic rate payers.

Yes as Jeremy says - the gain is £60000!

Sorry, my misunderstanding of the answer.

Jeremy535897

Keep_pedalling said:

purdyoaten2 said:

Keep_pedalling said:

purdyoaten2 said:

You have a Capital Gains allowance of 12300 AND a personal income tax allowance of 12570. If you were to earn more than 12570 after you have submitted your capital gains computation (on the basis that you have no other taxable income) you will pay additional capital gains tax. For example, if you earned 13570, 1000 over the personal allowance, that would mean that 1000 more of the gain should have been taxed at 28% as opposed to 18%, an extra £100 of tax.

Are you sure about that? The 28% rate is for HR tax payers not basic rate payers.

Yes as Jeremy says - the gain is £60000!

Sorry, my misunderstanding of the answer.

Understandable. I thought about replying as you did, but then realised why it wasn't necessary to do so.