How to calculate whether capital gains push me into the higher rate bracket?

mrodent33

This is for tax year 24-25. And I'm talking about GIA (unsheltered investment accounts).

In anticipation of the budget immediately applying the new CGT rates (which turned out to be the case), at the beginning of October I sold a load of GIA funds and thus made some capital gains.

I have found an online app (for which I give absolutely no guarantee concerning its accuracy!) for calculating CGT, based on you feeding it a long list of transactions (buy/sell) and dividends... it's here: https://cgtcalc.galloway.me.uk/

This tells me that I have already, for 24-25, a capital gain of £26400 and a basic rate liability of £2340 (taking into account the £3000 allowance for 24-25 and the fact that these gains attract only 10% CGT -basic rate- because they happened before the budget).

I am considering selling more funds, which gains would now obviously incur 18% CGT liability, before the end of this tax year. But I want to understand how to prevent going into the higher rate bracket.

For the sake of argument, let's assume initially that I have literally no income at all. At what point would capital gains ALONE push some of those gains into the higher rate CGT marginal rate?

And if I do have some income, e.g. from employment, or dividends, what formula do I use to find out how close I'm getting to the higher rate threshold?

eskbanker

Not sure I'm understanding the question, in that chargeable gains are added to all other income and any amount exceeding the higher rate threshold (£50,270) is taxed at the higher rate?

https://www.gov.uk/capital-gains-tax/rates explains....

mrodent33

@eskbanker ... yes, it really was as basic as that! I am a CGT virgin and will have to pay for the first time for 24-25. So if I understand correctly, the answer to my first question (no income at all) would be £53,270 capital gains: taking into account the CGT allowance of £3000 for this year, I should try to avoid exceeding £53.27k gains over the tax year.

And the second question: after taking into account the personal allowance (applicable to both employment income and dividend income, if I understand correctly), and also taking account of the paltry dividend allowance, you just add the "taxable income" and the "taxable gains"... I *think* I understand.

But I'm still a bit unclear: in fact I have received £9100 in income this year (paid from my own micro-company), and let's say I have £0 in dividends and £0 in savings interest, ... since that £9100 will be covered entirely by the personal allowance ... does that in fact mean I can still go up to £53.27k capital gains? I.e. that it is literally only the "taxable income" that has any bearing whatsoever on these calculations? I'm confused because in fact earning income of only £37700 above the £12570 personal allowance pushes you into the higher bracket.

Do I in fact have to deduct that £9100 from this £53270 (= £44170) to arrive at this "maximum desirable gains", above which I would start paying 24% CGT?

Nomunnofun1

If you have no other income (your first paragraph) you cannot utilise the personal allowance of 12570 against gains. 

The first 37700 would be chargeable at the lower rate with the remaining amount at the higher rate. 

mrodent33

@Nonmunnofun1

Yes... it may not be apparent, but I had grasped that much. PA only applicable to INCOME.

It's the scenario of £9100 employment income (and nothing else) that I can't work out. If that is my situation, how much can I get, maximum, in the way of **capital gains** before those gains start being taxed at 24% (higher rate)... ?

Nomunnofun1

mrodent33 said:

@Nonmunnofun1

Yes... it may not be apparent, but I had grasped that much. PA only applicable to INCOME.

It's the scenario of £9100 employment income (and nothing else) that I can't work out. If that is my situation, how much can I get, maximum, in the way of **capital gains** before those gains start being taxed at 24% (higher rate)... ?

The same answer. The remaining personal allowance of 3470 (12570 - 9100) is unused. 37700 of capital gains (after 3000 annual exemption) is taxed at the lower rate.