Tax return whilst on PAYE?
Discussion
Hi all, a quick question please...
I'm on PAYE but I have recently sold a few shares. I have received a receipt etc for the transaction which advises me to keep it for tax purposes.
[bugger] thought I, I hadn't thought about that!
So what's the deal? How do I go about telling Mr Taxman of my "extra" income? As it won't be picked up on PAYE. Do I have to complete an entire tax return for 1 (sub £1k) transaction? If so where do I get one from? And when do I have to declare the income?
Of course the other side of me thinks - how will they even know that I've sold the shares (or had them in the first place come to think of it!) - do the trading company inform the IR?
Cheers
Phil
I'm on PAYE but I have recently sold a few shares. I have received a receipt etc for the transaction which advises me to keep it for tax purposes.
[bugger] thought I, I hadn't thought about that!
So what's the deal? How do I go about telling Mr Taxman of my "extra" income? As it won't be picked up on PAYE. Do I have to complete an entire tax return for 1 (sub £1k) transaction? If so where do I get one from? And when do I have to declare the income?
Of course the other side of me thinks - how will they even know that I've sold the shares (or had them in the first place come to think of it!) - do the trading company inform the IR?
Cheers
Phil
I think you are honour bound to tell the IR (or whatever they are now called) if you have income in addition to your PAYE income. So being on PAYE alone is no guarantee that there is no requirement to complete a tax return.
Share and investment income is taxed at source, for example, but in many cases - higher rate taxpayers for example - the amount is less than the tax authorities wuld like people to pay and a tax return is required to allow adjustments to be made.
HOWEVER, in the case of a share sale, the value is not income but capital gain (or loss). Whilst the capital gain tax rate is quite high it is separate (afaik) from earnings and gains up to a certain level are tax free. I think the level is about £6k in a tax year but I may be out of date on that. Best check on the IR web site.
The 'gain' is, normally, the difference between the price you paid for the shares and the price you sell them at (minus commissions I think but not sure.)
It can get more complex than that if the share has been revalued or a takeover has occurred at some point, etc. The idea is the same but the calculation gets more interesting.
If you are selling small amounts the gain/loss amount in any one year is unlikely to exceed the threshold so my understanding is that there is no need to declare it. If filling in a return any amounts under the threshold can simply be entered as "Less than £6k" or whatever the amount is.
I think that is correct. More than happy to learn if anyone knows different.
Share and investment income is taxed at source, for example, but in many cases - higher rate taxpayers for example - the amount is less than the tax authorities wuld like people to pay and a tax return is required to allow adjustments to be made.
HOWEVER, in the case of a share sale, the value is not income but capital gain (or loss). Whilst the capital gain tax rate is quite high it is separate (afaik) from earnings and gains up to a certain level are tax free. I think the level is about £6k in a tax year but I may be out of date on that. Best check on the IR web site.
The 'gain' is, normally, the difference between the price you paid for the shares and the price you sell them at (minus commissions I think but not sure.)
It can get more complex than that if the share has been revalued or a takeover has occurred at some point, etc. The idea is the same but the calculation gets more interesting.
If you are selling small amounts the gain/loss amount in any one year is unlikely to exceed the threshold so my understanding is that there is no need to declare it. If filling in a return any amounts under the threshold can simply be entered as "Less than £6k" or whatever the amount is.
I think that is correct. More than happy to learn if anyone knows different.
Many people om PAYE ALSO have to complete tax returns. It depends on their personal circumstances.
Basically, if you have enough earnings from all sources which put you into the 40% tax bracket, then you should be completing self assessment tax returns.
The current annual allowance for Capital Gains is £8,500 - so, if your total Capital Gains for 2005/06 are less than this, you will not be liable to Capital Gains Tax and therefore you will not be required to request a tax return from HM Customs and Revenue in order to declare such gains.
Basically, if you have enough earnings from all sources which put you into the 40% tax bracket, then you should be completing self assessment tax returns.
The current annual allowance for Capital Gains is £8,500 - so, if your total Capital Gains for 2005/06 are less than this, you will not be liable to Capital Gains Tax and therefore you will not be required to request a tax return from HM Customs and Revenue in order to declare such gains.
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