Hi
I understand that income tax and Capital Gains Tax are separate taxes (HMRC website tells me so). I’m wanting to be certain how the tax free thresholds work
If I take an income of £12,500 (from my SIPP as taxable income drawdown) but also sell some shares making a £2000 gain, do I pay any tax?
Basically, is it
Scenario 1: Personal tax allowance of £12,500, CGT allowance of £6000 – Both income & CGT gain are below their respective thresholds so no tax to pay
Or
Scenario 2: CGT gain is below CGT threshold, but combined income is £14,500 and the personal tax allowance applies to that figure as a whole. So I need to pay some tax.
Thanks
Pete
Got a credit card? use our Credit Card & Finance Calculators
Thanks to Wasron,jfgw,Rhyd6,eyeball08,Wondergirly, for Donating to support the site
Do income tax & CGT tax thresholds apply separately?
-
- The full Lemon
- Posts: 10439
- Joined: November 4th, 2016, 9:33 am
- Has thanked: 3645 times
- Been thanked: 5272 times
Re: Do income tax & CGT tax thresholds apply separately?
SciFi wrote:Hi
I understand that income tax and Capital Gains Tax are separate taxes (HMRC website tells me so). I’m wanting to be certain how the tax free thresholds work
If I take an income of £12,500 (from my SIPP as taxable income drawdown) but also sell some shares making a £2000 gain, do I pay any tax?
Basically, is it
Scenario 1: Personal tax allowance of £12,500, CGT allowance of £6000 – Both income & CGT gain are below their respective thresholds so no tax to pay
Or
Scenario 2: CGT gain is below CGT threshold, but combined income is £14,500 and the personal tax allowance applies to that figure as a whole. So I need to pay some tax.
Thanks
Pete
If the shares making the £2000 gain are not in the SIPP they are covered by the CGT allowance. If the are in the SIPP then there is no CGT, but there will be an income tax consideration when you withdrawn the cash from those shares from the SIPP.
Arb.
-
- Lemon Half
- Posts: 7901
- Joined: November 4th, 2016, 11:24 am
- Has thanked: 7 times
- Been thanked: 3052 times
Re: Do income tax & CGT tax thresholds apply separately?
SciFi wrote:Hi
I understand that income tax and Capital Gains Tax are separate taxes (HMRC website tells me so). I’m wanting to be certain how the tax free thresholds work
If I take an income of £12,500 (from my SIPP as taxable income drawdown) but also sell some shares making a £2000 gain, do I pay any tax?
Basically, is it
Scenario 1: Personal tax allowance of £12,500, CGT allowance of £6000 – Both income & CGT gain are below their respective thresholds so no tax to pay
Or
Scenario 2: CGT gain is below CGT threshold, but combined income is £14,500 and the personal tax allowance applies to that figure as a whole. So I need to pay some tax.
Thanks
Pete
Scenario 1.
-
- Lemon Pip
- Posts: 98
- Joined: May 12th, 2018, 6:35 pm
- Has thanked: 108 times
- Been thanked: 40 times
Re: Do income tax & CGT tax thresholds apply separately?
SciFi wrote:Scenario 1: Personal tax allowance of £12,500, CGT allowance of £6000 – Both income & CGT gain are below their respective thresholds so no tax to pay
Or
Scenario 2: CGT gain is below CGT threshold, but combined income is £14,500 and the personal tax allowance applies to that figure as a whole. So I need to pay some tax.
The tax-free thresholds for income tax and CGT are completely separate (so it's your Scenario 1).
The tax bands are not entirely separate. Specifically, if your gains exceed the CGT threshold, the rate of CGT that you pay depends on whether your income and gains combined exceed the higher-rate income tax threshold. See: https://www.gov.uk/capital-gains-tax/rates
Re: Do income tax & CGT tax thresholds apply separately?
Thanks for responses.
I should have pointed out the £2000 share gain is completely separate from my SIPP
I think it's that information on the tax bands are not being entirely separate that confused me. I must have heard that somewhere and conflated different issues. Makes sense to me now.
Cheers
Pete
I should have pointed out the £2000 share gain is completely separate from my SIPP
I think it's that information on the tax bands are not being entirely separate that confused me. I must have heard that somewhere and conflated different issues. Makes sense to me now.
Cheers
Pete
-
- The full Lemon
- Posts: 18957
- Joined: November 4th, 2016, 3:58 pm
- Has thanked: 639 times
- Been thanked: 6694 times
Re: Do income tax & CGT tax thresholds apply separately?
As others have noted they are all separate and so you can double and treble dip.
As well as no tax if your base income is below the personal allowance, you can also have up to 6K in cap gains (this year), up to 1K in dividends. and up to 6K in interest income. And still pay no tax.
That could change tomorrow as well as changing a bit next month anyway.
As well as no tax if your base income is below the personal allowance, you can also have up to 6K in cap gains (this year), up to 1K in dividends. and up to 6K in interest income. And still pay no tax.
That could change tomorrow as well as changing a bit next month anyway.
Who is online
Users browsing this forum: No registered users and 26 guests