will a substantial capital gain affect my basic income tax rate?

mc50

Ignoring my personal allowance for a minute, salary £10K,  State pension £11K, Dividend income £30K, ( so currently at the 8.75% rate) then a substantial cgt derived from a BADR gain. How does HMRC treat the capital gain. Whilst the  BADR rate should be 10%, will the capital gain take my taxable income over the 50270 limit raising my dividend tax to 33%. Will some of the capital gain affect the dividend income rate OR is it treated entirely separate. Past experience shows HMRC interpret the rules their own way. I would appreciate any experienced views.

eskbanker

Based on those figures, your taxable income would be slightly over the higher rate threshold even without the capital gains anyway, so a small slice of the dividend income would be at the higher rate.

However, the gains don't affect your income tax, even though your taxable income plus the gains are used to determine the rate of CGT payable.

Bookworm105

income is subject to income tax
capital gains are subject to capital gains tax 
those are rules that are not open to interpretation!

the only crossover is the total of income + capital gain determines what rate of CGT you pay on the capital gain.
But the capital gain never impacts what rate of income tax you pay for the above reason 

mc50

Thanks to both but I am still not quite clear. "the only crossover is the total of income + capital gain determines what rate of CGT you pay on the capital gain"  That is what "taxable rate" is applied to me.
So it appears If I have a large capital gain It does in fact add to my income for the purposes of determining my taxable rate, is this right ? if so won't the higher Taxable rate apply to the dividend tax making it go from 8.75 to 33%

eskbanker

mc50 said:

Thanks to both but I am still not quite clear. "the only crossover is the total of income + capital gain determines what rate of CGT you pay on the capital gain"  That is what "taxable rate" is applied to me.
So it appears If I have a large capital gain It does in fact add to my income for the purposes of determining my taxable rate, is this right ? if so won't the higher Taxable rate apply to the dividend tax making it go from 8.75 to 33%

"Taxable rate" is too vague a term when there are two different taxes applicable here.

The point is that a capital gain won't affect the rate of income tax you pay on income, including dividends.

However, your taxable income is added to your capital gain in order to determine the rate of CGT that you pay:

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

mc50

Thanks for all your wise thoughts and council. Just want to get this right before I submit my return