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Capital Gains Tax
Mickey
Posted: 14 October 2017 09:15:14(UTC)
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Hi,
Would it be correct to say that CGT is payable on profits over £11,300 at 10% for those earning £0 to £33,500. For example a non tax payer still cops it for CGT once they have gains over £11,300 despite having no other earnings?
colin overton
Posted: 14 October 2017 13:43:20(UTC)
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Dear Mickey, I believe that's correct. However there is a down side. If you go over the CGT allowance limit you have to fill in a tax return that details ALL transactions not only the ones over the allowance. If you choose to use the HMRC info. sheets, you have to fill in a separate "sheet" with ~15 fields for each transaction. So if you have made 20 or 30 transitions its 20 or 30 individual sheets, even if you only made ~£100 gains. This is quite a time consuming exercise. You can submit your own spreadsheet but it has to be attached to your on-line tax return as a pdf not a normal spreadsheet. This is not difficult to do, but requires a little facility with e.g. excel. On the up side you can deduct buying/selling costs from gains and put in any losses from transactions for the last 5(?) years.
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Mickey on 14/10/2017(UTC)
Stephen B.
Posted: 14 October 2017 14:19:40(UTC)
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Basic rate taxpayers pay 18%, not 10%. But your general point is correct, it is possible to pay CGT even if your income is very low - I managed to do it in 1999/2000. It's unusual though, not least because ISAs are free of CGT and it's usually a good idea to use them.
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Mickey on 14/10/2017(UTC)
Bruce J.
Posted: 14 October 2017 14:46:28(UTC)
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Also if your total turnover for the year is 4X the tax free limit:


So, even if you DONT make a profit at all, or your gains are less tha the limit, if the total volume of your sales was £44,000 plus then you have to itemise every purchase and sale. This becomes particularly complex if you have bought a particular share in a few small packages and then sold again i the same way. Be warned, it is time consuming.
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Mickey on 14/10/2017(UTC), Andy May on 22/01/2018(UTC)
Nigel G
Posted: 14 October 2017 15:52:19(UTC)
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Stephen B.;51970 wrote:
Basic rate taxpayers pay 18%, not 10%. But your general point is correct, it is possible to pay CGT even if your income is very low - I managed to do it in 1999/2000. It's unusual though, not least because ISAs are free of CGT and it's usually a good idea to use them.

The rates have changed. For basic rate taxpayers, residential property is taxed at 18%... other assets are now 10%.
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Mickey on 14/10/2017(UTC)
Mickey
Posted: 14 October 2017 15:57:01(UTC)
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Thanks everyone for that help.
I have just spent some time putting our portfolios into Sharepad which comes up with a CGT figure. Previously we have just waited to see what our statements from HL summed up twice a year. Your advice is greatly appreciated.
Thanks.
Mickey
Posted: 14 October 2017 16:01:14(UTC)
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Nigel G;51974 wrote:
...For basic rate taxpayers, residential property is taxed at 18%... other assets are now 10%.

Thanks, it was that phrase 'basic rate taxpayer' which confused me, I wondered if someone is not paying any tax due to not earning then are they a basic rate taxpayer. As I understand it now, the 'basic rate taxpayer' for CGT is someone earning nothing to £33,500.

I wish they would simplify the tax rules though. I believe the dividend allowance is on top of your basic rate allowance whereas not so for calculating CGT.
Stephen B.
Posted: 14 October 2017 16:04:11(UTC)
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Nigel G;51974 wrote:
The rates have changed. For basic rate taxpayers, residential property is taxed at 18%... other assets are now 10%.


Oops - I even checked it on the hmrc web site, but I just looked at the first section and didn't scroll down! Interesting that taper relief was abolished because of headlines about wealthy people paying less tax than their cleaners - I suppose at 20% they're now equal which is presumably OK :)
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Mickey on 14/10/2017(UTC)
colin overton
Posted: 15 October 2017 12:50:54(UTC)
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I earn very little income, below the tax threshold, but still had to pay CGT last year. My CGT bill, being only 10% of the total above £11,300 (excluding any ISA transactions) was not great, but selling mostly UTs in small amounts meant I had ~25 transactions. This meant a fair amount of work, and would have been a tremendous amount of work if I'd used the HMRC info sheet, 25 times. I can't recall whether these sheets allow "cut and paste" technics.
Remember that this would be required to detail all transactions if you'd only made £100 over the CGT limit, and hence owed £10 of tax. I now keep a running spreadsheet of any gains, but would not be keen to exceed the CGT limit, not because of the tax but for the work involved.
This seems disproportionate and I would ask the Taxman to review the amount of work individuals have to do. Bizarrely if you claim losses in previous years only a single figure entry is required.
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Mickey on 15/10/2017(UTC)
Alan Selwood
Posted: 15 October 2017 14:34:44(UTC)
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[Duplicated post]
Alan Selwood
Posted: 15 October 2017 14:38:33(UTC)
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Presumably because you notified them of the loss in the earlier year, so their system can do a quick look-up?

I'm sure that if you're claiming a loss normally, you have to show your workings.

It keeps bringing me back to my 'cracked-record' advice:
Try to get all your equity holdings into ISAs as soon as you can, so as to reduce the risk of tax and to cut down hugely on the tax reporting.
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Mickey on 15/10/2017(UTC)
Stephen B.
Posted: 15 October 2017 14:49:55(UTC)
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I don't think the system can do anything automatically; either it just accepts your numbers or it flags it for the attention of a human. Last year I had sales above the reporting threshold but gains below the limit thanks to a loss. It was indeed a pain to calculate - the loss was a split capital IT which had had a couple of reconstructions plus some buys and sells over a couple of decades, so even working out what had happened was non-trivial (and I keep fairly thorough records). However, on the tax return I just listed the company names, sale proceeds and gain/loss in the text information box without any detailed calculations. Potentially they could have come back and asked for more details but in fact it just went through automatically - presumably there are trigger thresholds in their software to decide where to put (expensive) human effort.
colin overton
Posted: 16 October 2017 10:57:31(UTC)
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As usual Alan's tip about moving all investments into ISA is right. I am in the process of doing this, but of course even Bed and ISA does generate potential CGT liabilities. This process for me will take at least one more FY, unless there's a crash.
In fact I'm not really sure what "true" Bed and ISA "buys" you?
Also I agree it's easy if not a certainty that one will become cynical filling in a tax return. I'm no longer sure that the on-line HMRC's rules are really understandable. Then there's the issue, this year, of which rule is applied first, to whose advantage.
Stephen B.
Posted: 16 October 2017 11:21:33(UTC)
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colin overton;52021 wrote:

In fact I'm not really sure what "true" Bed and ISA "buys" you?
Also I agree it's easy if not a certainty that one will become cynical filling in a tax return. I'm no longer sure that the on-line HMRC's rules are really understandable. Then there's the issue, this year, of which rule is applied first, to whose advantage.


I'm not sure what you mean by "true" bed and isa, but if it's done as a single transaction you may get reduced dealing costs and also get closer to trading at the same price than if it's done separately. There will always be some loss though. On the other hand, it's now not just about CGT, there's also the dividend tax to think about, with the allowance reducing to £2k next year.

I'm not sure what you mean about which rule is applied first - what are you thinking of?
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colin overton on 16/10/2017(UTC)
colin overton
Posted: 16 October 2017 13:06:30(UTC)
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Dear SB, I'm not sure there is often a saving with Bed and ISA transactions? I use HL and sell/buy UTs mostly, although also ITs and shares. I haven't noticed a saving and couldn't see one from HL's cost, but might be wrong. I would rather have the flexibility to choose the time to re-buy within an ISA and also to review whether there is a "better" UT/IT or even share to consider. I personally find these review opportunities useful. I also rather like setting sell/buy limits for shares/ITs. There is of course the "risk" that you are out of the market for a few days or weeks, but that surely works both ways depending on short term market movements? You can even buy before you sell, circumstances allowing. Waiting 30days (?) is hardly an eternity. I guess if you're a professional and have clients, it's easier to defend a Bed and ISA transaction, whatever the result?
The tax (CGT or income) implications are the same whether you Bed and ISA or just sell and buy in an ISA, or if you sell and not rebuy. You're correct that this FY there is a greater need to put div bearing investments in an ISA.

My comments on tax and which tax rules are applied first relate to an article in the Torygraph earlier this year, afraid I couldn't find the article back or recall the circumstances. However I did delay my tax return because of it and even took the precaution of putting the words that the T recommended in one of the many boxes. Recently I have found that the amount of income that is taxable from various sources always seems lower than you think or quotes bands, but I am a very low income tax payer.
Stephen B.
Posted: 16 October 2017 13:15:40(UTC)
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With HL, if you do an explicit Bed and ISA the sale is charge free:

http://www.hl.co.uk/shares/bed-isa-sipp

That isn't relevant for funds as they don't charge for those anyway. The new Barclays system has an explicit Bed and ISA option which I used and it didn't charge me at all, just stamp duty and a fairly tight bid/offer spread.
Stephen B.
Posted: 16 October 2017 13:19:15(UTC)
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By the way, the comment about waiting 30 days isn't applicable here, it's only relevant if you sell and re-purchase outside an ISA.
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