Capital gains calc + when to pay
Discussion
Hi all, I’m hoping someone wouldn’t mind checking the below for me to ensure I’m on the right track. I’m using rounded numbers for ease and please ignore the capital gains free allowance, this would be used up elsewhere.
Sell stock and shares for a total of £100k
Original purchase price of the shares was £10k
Higher Income tax payer so 28% on £90k leaves a tax bill of £25,200.
so 1) are those workings correct?
2) If the shares were sold say, April 10 2016 am I right in thinking…
Self Assessment registration would need to be completed before Oct 2017, and the tax bill paid before Jan 2018?
3) If the above is correct, can you effectively invest that £25,200 back into stocks and shares risk free as long as sold before April 2017? IE, if you lose money, you just write it off against the total tax due for the year and if they go up… you pay more tax but have made more profit as well?
Thanks in advance for any help!
Sell stock and shares for a total of £100k
Original purchase price of the shares was £10k
Higher Income tax payer so 28% on £90k leaves a tax bill of £25,200.
so 1) are those workings correct?
2) If the shares were sold say, April 10 2016 am I right in thinking…
Self Assessment registration would need to be completed before Oct 2017, and the tax bill paid before Jan 2018?
3) If the above is correct, can you effectively invest that £25,200 back into stocks and shares risk free as long as sold before April 2017? IE, if you lose money, you just write it off against the total tax due for the year and if they go up… you pay more tax but have made more profit as well?
Thanks in advance for any help!
doogle83 said:
Hi all, I’m hoping someone wouldn’t mind checking the below for me to ensure I’m on the right track. I’m using rounded numbers for ease and please ignore the capital gains free allowance, this would be used up elsewhere.
Sell stock and shares for a total of £100k
Original purchase price of the shares was £10k
Higher Income tax payer so 28% on £90k leaves a tax bill of £25,200.
so 1) are those workings correct?
2) If the shares were sold say, April 10 2016 am I right in thinking…
Self Assessment registration would need to be completed before Oct 2017, and the tax bill paid before Jan 2018?
3) If the above is correct, can you effectively invest that £25,200 back into stocks and shares risk free as long as sold before April 2017? IE, if you lose money, you just write it off against the total tax due for the year and if they go up… you pay more tax but have made more profit as well?
Thanks in advance for any help!
The basic calculation based on the data you have given is correct.Sell stock and shares for a total of £100k
Original purchase price of the shares was £10k
Higher Income tax payer so 28% on £90k leaves a tax bill of £25,200.
so 1) are those workings correct?
2) If the shares were sold say, April 10 2016 am I right in thinking…
Self Assessment registration would need to be completed before Oct 2017, and the tax bill paid before Jan 2018?
3) If the above is correct, can you effectively invest that £25,200 back into stocks and shares risk free as long as sold before April 2017? IE, if you lose money, you just write it off against the total tax due for the year and if they go up… you pay more tax but have made more profit as well?
Thanks in advance for any help!
If the shares were sold on 10 April 2016, they would have been sold in tax year 2016/17. This means that the details of the disposal and gain would need to be declared in the 2016/17 self assessment tax return.
The filing deadline date for the 2016/17 tax return is 31 October 2017 if you intend to file a PAPER return or 31 January 2018 if you intend to file on-line.
The payment date of the capital gains tax and any other amounts due under self assessment would be 31 January 2018.
If don't already have a self assessment tax reference number (referred to by HMRC at the UTR = Unique Tax Reference), you need to apply to HMRC to be allocated one.
Once you have this, you then need to apply separately to be able to file on-line as HMRC will need to give you a Government Gateway number and a related password. Alternatively, you can make use of an accountant who will have a generic set of access codes which will enable him/her to file electronically on your behalf.
Generally speaking, a capital loss can be offset against a capital gain in the same tax year.
Note that the method as to how capital gains tax is paid and collected on the sale of residential properties is changing radically with effect from 6 April 2019.
Edited by Eric Mc on Tuesday 29th December 11:46
doogle83 said:
If the above is correct, can you effectively invest that £25,200 back into stocks and shares risk free as long as sold before April 2017? IE, if you lose money, you just write it off against the total tax due for the year and if they go up… you pay more tax but have made more profit as well?
No, there's no free lunch.On the re-invested £25.2k if you make a further gain of £1,000 you pay tax of £280 and end the year £720 better off.
On the re-invested £25.2k if you make a loss of £1,000 you get tax relief worth £280 on that loss. BUT You're now £1,000 down so you end the year £720 worse off.
Ok, that all makes sense. Thanks for the detailed responses guys!
One final thing... If the person is a lower rate income tax payer and therefore eligible for the 18% capital gains rate... Does the total gain for the year count towards their income amount for the year?
Ie, no earnings from a job in that FY but ~£75k capital gain so is that 18% or 28%?
Thanks again!
One final thing... If the person is a lower rate income tax payer and therefore eligible for the 18% capital gains rate... Does the total gain for the year count towards their income amount for the year?
Ie, no earnings from a job in that FY but ~£75k capital gain so is that 18% or 28%?
Thanks again!
doogle83 said:
Ok, that all makes sense. Thanks for the detailed responses guys!
One final thing... If the person is a lower rate income tax payer and therefore eligible for the 18% capital gains rate... Does the total gain for the year count towards their income amount for the year?
i.e, no earnings from a job in that FY but ~£75k capital gain so is that 18% or 28%?
Thanks again!
The capital gains amount does count for measuring your income as it approaches the Higher Rate tax threshold. In the current tax year (2015/16), the Higher Rate tax threshold is £31,785. If an individual had no income apart from a Capital Gain of (say) £100,000,One final thing... If the person is a lower rate income tax payer and therefore eligible for the 18% capital gains rate... Does the total gain for the year count towards their income amount for the year?
i.e, no earnings from a job in that FY but ~£75k capital gain so is that 18% or 28%?
Thanks again!
It would work out as follows -
£11,100 - tax free (Capital Gains Tax Allowance)
£31,785 @18% = £5,721.30
£57,115 @28% = £15,992.20
Total CGT - £21,713.50
Or
If she/he sells half the stock in March 2016 then the other half in April 2016 (assuming they wanted to offload within a month) then they would get the £11,200 tax free in 2015/16 & 2016/17 so likely to save you best part of £3k
Other lesson is make sure you buy within an ISA ongoing or ensure you sell held stock up to tax free and rebuy into ISA up to your annual allowance. This stopping any future such issues
If she/he sells half the stock in March 2016 then the other half in April 2016 (assuming they wanted to offload within a month) then they would get the £11,200 tax free in 2015/16 & 2016/17 so likely to save you best part of £3k
Other lesson is make sure you buy within an ISA ongoing or ensure you sell held stock up to tax free and rebuy into ISA up to your annual allowance. This stopping any future such issues
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