Does anyone actually use up their annual CGT allowance?

[98elise]

Seany88 said:

Simple question really, I'm curious as to why its even offered as to me it only benefits those with large assets? Or that it'll give you a nice little 'freebie' if you sell a second home that made a bit of capital growth. Was it introduced by the Tories?

There are loads of instances where someone without large assets could have a capital gain. Anyone in a save as you earn shares scheme at work will have a capital gain (assuming the shares went up in value). I was in one a few years ago which was open equally to every member of staff, and easily passed the capital gain allowance when it matured. Suddenly a lot of people needed tax advice on selling the shares


You could easily buy a car/bike/boat etc and end up selling for more than you pay. As long as its not your business, you wouldn't have to pay any tax as it would be within your alowance.

[sumo69]

Eric Mc said:

You just need to be sure that you don't become a "share trading business".

You also need to be aware of the reporting thresholds for CGT purposes. Even if you have made no gain or a gain lower than the annual allowance, you will need to report the fact that you have had capital disposals if the gross sale [proceeds exceed £42,400 (2012/13).

Edited by Eric Mc on Monday 9th September 18:15

Interestingly, that reporting threshold for capital disposals of 4x the annual exempt amount is NOT stated in legislation but is shown as a tax return requirement.

A fellow accountant I know has clients that exceed this but not the actual exemption itself and he simply adds a note in their 'Additional Information' section and to date has only had it challenged once which quickly disappeared when he challenged HMRC to show the clause in the legislation.

I have clients who may be challenged as share trading/dealing given the regularity and volume of the transactions - of course if they were there would be additional costs that could be claimed such as 'home as office' and investment management fees etc

David

[fluffnik]

Eric Mc said:

Are you planning on running a business that develops property. It's not that unusual you know.

To an extent yes, but (mostly) for let rather than sale.

As a wheelchair user I'd like to leave the world with more more accessible habitation than I found...

At least one property will be a continental holiday home, but mostly I want to make wheely friendly places to let to folks who are not necessarily (yet!) disabled.

The main purpose is to give myself a steady inflation proof base income/pension with a degree of entertaining engagement and perhaps a slightly warm fuzzy feeling.

[Seany88]

98elise said:

There are loads of instances where someone without large assets could have a capital gain. Anyone in a save as you earn shares scheme at work will have a capital gain (assuming the shares went up in value). I was in one a few years ago which was open equally to every member of staff, and easily passed the capital gain allowance when it matured. Suddenly a lot of people needed tax advice on selling the shares


You could easily buy a car/bike/boat etc and end up selling for more than you pay. As long as its not your business, you wouldn't have to pay any tax as it would be within your alowance.

Cars are exempt from CGT, so I assume bikes and possibly boats are too?

[Seany88]

Eric Mc said:

Got it in one.

You have to understand why wee have CGT at all. Before 1965, items that did make a gain on disposal that were not part of an individual's trading activity might escape tax altogether. Norman Wisdom famously won a case where he pleaded succesfully that he wasn't a gold trader and he had just been lucky in that gold values had risen before he sold his "investment".

CGT came about to ensure that some tax would be paid on such windfalls.

Since then, of course, with CGT firmly established, people will deliberately "steer" a transaction into the realms of CGT in preference to keeping it as a normal trading or earned activity BECAUSE of the favourable taxation under CGT rules. An awful lot of tax avoidance schemes are actually based on the different tax treatment between "capital" and "revenue" transactions.
Ask any banker about how he received his bonus.

Very interesting, I did wonder what historical turning point caused it to become enshrined in our tax laws today.

[Eric Mc]

fluffnik said:

Eric Mc said:

Are you planning on running a business that develops property. It's not that unusual you know.

To an extent yes, but (mostly) for let rather than sale.

As a wheelchair user I'd like to leave the world with more more accessible habitation than I found...

At least one property will be a continental holiday home, but mostly I want to make wheely friendly places to let to folks who are not necessarily (yet!) disabled.

The main purpose is to give myself a steady inflation proof base income/pension with a degree of entertaining engagement and perhaps a slightly warm fuzzy feeling.

You do need to be careful. There are many developers at the moment who, because of the slow down in property sales, had to put their "housing for sale stock" out to rent - as a temporary measure. For some of them, this temporary situation has continued for a number of years as they wait for the market to pick up.

[iphonedyou]

I'll probably use mine this year. I've used up some of it on share sales.

Investing in AIM, and while it's now eligible for ISA, I'm sitting on profit that I'm not yet willing to sell out at to reinvest within the wrapper as it'll raise my averages.

[iphonedyou]

fandango_c said:

If you're Investing a couple of grand a year outside pension, why wouldn't you use an ISA?

Until very recently, AIM investments weren't ISAable. I'm sure there are other classes of investment that can't be included within an ISA.

[fluffnik]

Eric Mc said:

fluffnik said:

The main purpose is to give myself a steady inflation proof base income/pension with a degree of entertaining engagement and perhaps a slightly warm fuzzy feeling.

You do need to be careful. There are many developers at the moment who, because of the slow down in property sales, had to put their "housing for sale stock" out to rent - as a temporary measure. For some of them, this temporary situation has continued for a number of years as they wait for the market to pick up.

Developing a rental portfolio by renovating/adapting is the main part of the plan rather than improving/building for sale though I do anticipate an occasional sale to fund a new project.