Tax Free Allowance Limit For Selling Shares for a non-working person

The current Capital Gains Tax limit for selling shares without paying tax is £6,000.

The current Personal Tax Allowance is £12,570 of earnings without paying tax.

For a non-working person (non-earning), whose only income for the tax year will be the sale of shares, is their limit (without paying tax) £6,000 or £12,570?

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  • eskbanker
    eskbanker Posts: 29,811
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    NeilNeil said:
    The current Capital Gains Tax limit for selling shares without paying tax is £6,000.

    The current Personal Tax Allowance is £12,570 of earnings without paying tax.

    For a non-working person (non-earning), whose only income for the tax year will be the sale of shares, is their limit (without paying tax) £6,000 or £12,570?
    Neither!

    CGT applies if the gain crystallised by a sale exceeds the annual threshold (which is indeed currently £6K but £3K next year), i.e. it's not based on the value of the sale proceeds.

    Income tax is a separate regime, unaffected by selling shares.
  • eskbanker said:
    NeilNeil said:
    The current Capital Gains Tax limit for selling shares without paying tax is £6,000.

    The current Personal Tax Allowance is £12,570 of earnings without paying tax.

    For a non-working person (non-earning), whose only income for the tax year will be the sale of shares, is their limit (without paying tax) £6,000 or £12,570?
    Neither!

    CGT applies if the gain crystallised by a sale exceeds the annual threshold (which is indeed currently £6K but £3K next year), i.e. it's not based on the value of the sale proceeds.

    Income tax is a separate regime, unaffected by selling shares.
    Cost of shares at purchase + £6000
  • ColdIron
    ColdIron Posts: 8,640
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    The Personal Allowance cannot be used for capital gains
  • When I sold my rental property, I was on a low income.
    My accountant wrote some of the capital gains off against my personal allowance.
    8.5k from memory 3-4 years ago.
    Earnings 4k, the remainder of my personal allowance 8.5k + capital gains allowance 12k.
    Just over 20k written off in total. Still cost me £10k,  killing me to think about it.

  • eskbanker said:

    Income tax is a separate regime, unaffected by selling shares.
    My OH inherited shares a long time ago.  A few years ago her combined income and some unusually large capital gains pushed her just into the 40% tax bracket, as I recall.  So I don't think @eskbanker is correct.  Your Capital Gains are taxed as part of your income, just not the first £6000 worth (if that's what it is this year).  I'm not sure if the personal allowance applies for gains above the £6000 because that was offset against real income in the case of my OH.
    Reed
  • ColdIron
    ColdIron Posts: 8,640
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    edited 23 November 2023 at 9:40AM
    Capital gains* are used to determine your income and therefore your income tax rate but those gains cannot be offset against your Personal Allowance
    Edit: *I seem to recall only the gain above the Annual Exempt Amount is used when determining your income so this year you wouldn't add anything within the £6,000
  • eskbanker
    eskbanker Posts: 29,811
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    eskbanker said:
    Income tax is a separate regime, unaffected by selling shares.
    My OH inherited shares a long time ago.  A few years ago her combined income and some unusually large capital gains pushed her just into the 40% tax bracket, as I recall.  So I don't think @eskbanker is correct.  Your Capital Gains are taxed as part of your income, just not the first £6000 worth (if that's what it is this year).  I'm not sure if the personal allowance applies for gains above the £6000 because that was offset against real income in the case of my OH.
    It's true to say that there is a relationship between the two taxes, in that the rate of CGT is based on tax banding, so for that purpose gains are combined with taxable income, and some CGT may be payable at the higher rate as a result of that essentially artificial calculation, but the gains don't actually generate any additional income tax liability.  However, the point I was making really related specifically to OP's query about the allowances at the bottom end of the scale rather than the tiered rates further up it.

    When I sold my rental property, I was on a low income.
    My accountant wrote some of the capital gains off against my personal allowance.
    8.5k from memory 3-4 years ago.
    Earnings 4k, the remainder of my personal allowance 8.5k + capital gains allowance 12k.
    Just over 20k written off in total. Still cost me £10k,  killing me to think about it.
    I don't know what financial gymnastics your accountant performed, but I'm not aware of any circumstances (relevant to OP) where gains can be reclassified as income!  Maybe there was something property-related, but in OP's scenario of selling shares, the CGT gains can't be offset by the income tax allowance.

    ColdIron said:
    Capital gains* are used to determine your income and therefore your income tax rate
    As above, that's not my understanding, although taxable income forms part of the determination of the rate at which CGT is paid:

    https://www.gov.uk/capital-gains-tax/rates
  • ColdIron
    ColdIron Posts: 8,640
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    edited 23 November 2023 at 11:50AM
    eskbanker said:
    ColdIron said:
    Capital gains* are used to determine your income and therefore your income tax rate
    As above, that's not my understanding, although taxable income forms part of the determination of the rate at which CGT is paid:

    https://www.gov.uk/capital-gains-tax/rates
    Yes I take your point, it's a subtle distinction. Taxable income and gains are combined to determine your CGT band(s) but not vice versa. I.e they are separate regimes
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