Retirement income solely from dividends and capital gains

planforfuture

Hello,

Thanks in advance for your help.
I am retiring in April/May 2023 (i.e. the new FY) and and will be taking retirement income solely from dividends (non ISA stocks and shares and SIPP) and capital gains from selling non-ISA shares for a couple of years (until I touch my SIPP pot a couple years later 0 to let it grow more). And I have no other incomes apart from above.

As for FY 2023-24, the relevant allowances to me are:
Personal allowance £12,570
Capital Gain Tax £6,000
Dividends £1,000

The dividends I will receive for FY 23-24 is likely to reach £11000.

Am I right that CGT (£6,000) cannot be used in conjuction with the Personal Allowance even I have no other incomes? Or I can combine it i.e. to a total of £19,570 as tax free allownace for FY 23-24? I am a bit confused as from what I read from the gov website (  https://www.gov.uk/capital-gains-tax/rates ) under the Example section, it seems to indicate that it is allowed.

Your help will be much appreciated.

Dazed_and_C0nfused

The Personal Allowance is relevant but only in determining how much of your basic rate band you have used.

There is no "allowance" for dividends, it's a 0% tax rate.  But even if you have applied for Marriage Allowance it won't be relevant to you as your dividend income will fall within your Personal Allowance, whether it's £11,310 or £12,570.

Capital Gains are taxed separately to income tax, the bit that matters is how much basic rate band you have used.  Which will be nil.

But if your dividend income ends up being say £13,000 and £430 of it is taxed at the dividend nil rate I think that restricts the basic rate band available for any Capital Gains.

You will need to complete Self Assessment returns from 2023:24 onwards as dividend income > £10k is one of the criteria HMRC use for Self Assessment.

bostonerimus

The question I have is why aren't these investments, or at lease part of them, in an ISA?

Marcon

bostonerimus said:

The question I have is why aren't these investments, or at lease part of them, in an ISA?

Two obvious possibilities (but could be wrong!): OP has already used their full ISA allowance every year; or they want to trade in particular stocks and shares in a way which isn't possible within an ISA.

planforfuture

Yes correct.  I have already used up my annual ISA allowance.  My strategy is to maximise the personal and CGT allowance then subsidise my remaining income with cash or a small amount of pension from drawdown SIPP  is needed.

planforfuture

Is my following understanding correct (i.e. no other incomes apart from dividends and capital gain of sellingn of non ISA shares)?

Dividend income: £10,000
Personal allowance: £12,570

Hence my CGT allowance be £6000 + £2570 or remains to £6000?

Dazed_and_C0nfused

No, it's £6,000 (in 2023:24).

planforfuture

Thanks for the reply.