Capital gains, Property, zero or low income.

savit4l8er

Having looked at various sites I am not finding the answer to this.

I do understand the calculation to work out how much tax would be due using the 18% & the 24%.  I've also used various calculators to check the figures but the question I cannot seem to find an answer to is this.

Taking the GOV.UK site as an example, there is a question relating to income. 

How much do you expect your income to be in this tax year?

So the figure entered is then in part used to work out how much tax if any will be calculated at 18% before the remainder if applicable is calculated at 24%.

Taking it that there is an element to be calculated at 18%, the result given on the site is the same whether one enters £12000 or 0 for income when the personal allowance of £12570 is input.  

On the calculator below entering the same figures, the sum due reduces when £0 or a lower figure is entered. Presumably, placing more in the 18% band. 

https://www.charcol.co.uk/mortgage-calculators/capital-gains-tax-calculator/

So is the GOV site correct and if one receives no income or a couple of thousand in the relevant year, it doesn't matter or is it just not expecting that response and cannot calculate otherwise?

Hope that makes sense. 

Jeremy535897

The assumptions on the calculator you mention include that it assumes your income exceeds £12,570. If your taxable income is anywhere between £0 and £12,570, it will have no impact on the capital gains tax you owe, which will be £37,700 at 18% and the rest of the gain at 24%..

Bookworm105

the govt site is correct.
The amount of taxable gain subject to the lower CGT rate is based upon your "total income" for that tax year.

charcol one does not cover the "unusual" situation of the property owner with zero income tax liability presumably because those using a mortgage website will, by definition, have an income able to sustain a mortgage so such a scenario is unlikely.

CGT higher rate threshold is based on the formula: total income subject to income tax, minus income tax personal allowance, plus taxable capital gain (ie gain - costs - CGT £3k allowance) 
if that figure is higher than the income tax higher rate threshold 50,270 (ie personal allowance 12,570 + basic rate IT band 37,700) then you will pay the higher rate of CGT on the amount of the gain which is above 50,270

Eg1
gross employment income 26,000
deduct income tax allowances:
- 12,570 personal allowance

Total net income subject to income tax 13,430

taxable capital gain 37,000

"Total income" = 13,430+37,000 = 50,430
CGT at higher rate due on: 50,430 - 50,270 = 160 
CGT at basic rate due on: 37,000 - 160 = 36,840

Eg2
gross employment income 100
deduct income tax allowances:
- 12,570 personal allowance

Total net income subject to income tax 0

taxable capital gain 37,000

"Total income" = 0 + 37,000 = 37,000
CGT  at higher rate due on:  = 0
CGT  at basic rate due on: = 37,000 

if you want to see the calculation in full gory (manual) detail covering "all" scenarios then populate box A119 on page TCSN10 and then populate your CGT calculation on pages TCSN 43 - 44 arriving at the figure in box G40 (amount of unused basic rate band)
Tax Calculation Summary notes (2023-24) (publishing.service.gov.uk)

savit4l8er

Right, I was expecting it to be that. Just been playing around with figures on that site. So it seems anything over the £12570 allowance, even a smidgen, naturally reduces the 18% figure slightly and more gets taxed at the higher rate. However, it makes no difference how much it is under the allowance, it treated the same using the £37700.

Thank you for your reply, very much appreciated.

Dazed_and_C0nfused

Even income taxed at 0% (interest and/or dividends) can impact your CGT

savit4l8er

@Jeremy535897,

My initial response and thanks was to you which I was likely typing when @Bookworm105 was posting their reply also which I initially missed because I just hit the post button to look at something els.  So thank you to both of you, I'll look it all over.  Those examples help massively with the other personal allowances etc. 

And since, thanks to @Dazed_and_C0nfused also.

The more you study these things the better (or worse 😉) it becomes but it will all be clear eventually. 

singhini

I'm not fully understanding this thread.
Are people suggesting that Income Tax Allowance and Capital Gain Allowance are two entirely separate taxes, and are calculated separately and independently of each other? 

Scenario: I'm unemployed and receive £2,353 of Unemployment Benefit (JSA) in the tax year 2024/2025 and no other income (this is true). I'm desperate for some money to pay the bills so sell the family gold jewellery for £10,000 (Ive no paperwork for the actual cost of the gold jewellery as its years old but that doesn't matter to me as after my £6,000 CGT allowance (Gold Jewellery allowance*) that's only £1,000 gain and i still have the rest of my £12,570 allowance to use in my opinion).
However you all seem to suggest the £1,000 gain is taxable (in this scenario that would be at at 10%).
I haven't sold the family gold yet, but was planning on doing it ASAP (only reason ive not done it yet is the price keeps going up; its been £2,070 an ounce today).

Question 1 - in the scenario above, would the £1,000 gain be subject to CGT at 10%
Question 2 - How would i establish what the jewellery initially cost so i can accurately work out the true capital gain?


*bullion websites suggesting gold jewellery CGT allowance is £6,000 in tax year 2024/2025

Dazed_and_C0nfused

singhini said:

I'm not fully understanding this thread.
Are people suggesting that Income Tax Allowance and Capital Gain Allowance are two entirely separate taxes, and are calculated separately and independently of each other? 

Scenario: I'm unemployed and receive £2,353 of Unemployment Benefit (JSA) in the tax year 2024/2025 and no other income (this is true). I'm desperate for some money to pay the bills so sell the family gold jewellery for £10,000 (Ive no paperwork for the actual cost of the gold jewellery as its years old but that doesn't matter to me as after my £6,000 CGT allowance (Gold Jewellery allowance*) that's only £1,000 gain and i still have the rest of my £12,570 allowance to use in my opinion).
However you all seem to suggest the £1,000 gain is taxable (in this scenario that would be at at 10%).
I haven't sold the family gold yet, but was planning on doing it ASAP (only reason ive not done it yet is the price keeps going up; its been £2,070 an ounce today).

Question 1 - in the scenario above, would the £1,000 gain be subject to CGT at 10%
Question 2 - How would i establish what the jewellery initially cost so i can accurately work out the true capital gain?


*bullion websites suggesting gold jewellery CGT allowance is £6,000 in tax year 2024/2025

They are two separate taxes and have their own rules.

However CGT is connected to income tax in as much as the rates applied are linked to the income tax basic rate band.

You cannot use the income tax Personal Allowance against CGT.

The CGT allowance/annual exempt amount for the current (2024-25) tax year is £3,000.  Do you have a link to any of these billion websites that say differently?

singhini

Link here: Do You Pay Tax When Selling Gold In The UK? – 2024/25 Capital Gains Tax - Cheshire Gold Xchange | Gold Buyer in Warrington

Read point 2 under section "Gold Types and CGT"

PS - If your Rachel Reeves can you not lower this £6,000 rate please (your only hurting the working classes if you do, the rich don't sell gold they pass it down from one generation to the next using the 7 year survival rule for IHT)

singhini

And this website mentions £6,000 aswell
Capital Gains Tax on personal possessions: What you pay it on - GOV.UK (www.gov.uk)

Jeremy535897

You are confusing the capital gains tax exemption with the chattels exemption.
If you have a bunch of items of jewellery that are not part of a set, you would only pay capital gains tax if the sale proceeds of any single item of jewellery exceeded £6,000. See:
https://www.gov.uk/government/publications/chattels-and-capital-gains-tax-hs293-self-assessment-helpsheet/chattels-and-capital-gains-tax-2022-hs293