stevio
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Post by stevio on Mar 21, 2018 19:33:54 GMT
I am just looking into this but would appreciate any pointers?
I believe any gain is treated as a Capital Gain and Dividends under the Income Tax rules for dividends
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bigfoot12
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Post by bigfoot12 on Mar 21, 2018 20:35:13 GMT
I am just looking into this but would appreciate any pointers? I believe any gain is treated as a Capital Gain and Dividends under the Income Tax rules for dividends In general that is my understanding, but here are three things I watch out for (they might have gone away now, but I still look out for them):- 1. I think that some funds that invest in fixed income the dividend counts as interest and not a dividend. 2. Watch out for accumulation etfs as the accumulation counts as a dividend and not a capital gain - I have switched to dividend paying etfs were possible to make this easier. 3. If an ETF isn't a 'reporting ETF' there might be a problem that means capital gains become taxable as income.
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macq
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Post by macq on Mar 21, 2018 23:38:12 GMT
a good place to start is the personal tax on savings and investments section at GOV.UK for up to date rules (or the money advice service site is also useful)
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stevio
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Post by stevio on Mar 22, 2018 14:55:42 GMT
Can I check some figures?
If CGT allowance is £11,700 and assuming a 8% return (is that reasonable?) on investments not in a tax wrapper
Then if able to in some way bed and breakfast (spouse/ISA/buy similar alternative)
£11,700/8% = £146,250
So approx £150k of investments could receive a 8% CG per year without having to pay any CGT?
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bigfoot12
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Post by bigfoot12 on Mar 22, 2018 15:18:44 GMT
Yes, but I think that the CGT free allowance is £11,300 this year, maybe you are considering next year's number. Also you mention spouse, so you would both get one, and you can transfer between spouses without realising the tax - although not every platform will let you do that.
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macq
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Post by macq on Mar 22, 2018 16:06:59 GMT
Can I check some figures? If CGT allowance is £11,700 and assuming a 8% return (is that reasonable?) on investments not in a tax wrapper Then if able to in some way bed and breakfast (spouse/ISA/buy similar alternative) £11,700/8% = £146,250 So approx £150k of investments could receive a 8% CG per year without having to pay any CGT? hope you get that 8% pa going forward  Not sure if its what your asking or you may even know but you only pay the CGT if you make a profit on selling.By hopefully using bed & breakfast for £20000 per year and or gifting to a spouse you maybe able to get all your assets under a tax free wrapper before you need to sell for a profit and also keeps any income tax free.Also the rate of tax on CG is not the same as your normal rate so may not be as big a problem as you think. Apologies if you already know this or more and is worth checking my understanding of rules
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Post by dan1 on Mar 22, 2018 18:11:33 GMT
Can I check some figures? If CGT allowance is £11,700 and assuming a 8% return (is that reasonable?) on investments not in a tax wrapper Then if able to in some way bed and breakfast (spouse/ISA/buy similar alternative) £11,700/8% = £146,250 So approx £150k of investments could receive a 8% CG per year without having to pay any CGT? If you're holding individual shares then remember you may get caught by unexpected gains such as a takeover paid in cash, i.e. realising gains may not be all within your control. A nice, first world, problem to have though.
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stevio
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Post by stevio on Mar 24, 2018 5:56:50 GMT
I remember dividends and CGT form the top slice of income, is there an order of taxation eg salary, savings, dividends, CG etc?
How do they fit in with each other and where do the allowances fit in?
It seems personal pension contributions can help in increasing your tax band for both income and capital gains
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macq
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Post by macq on Mar 24, 2018 8:57:52 GMT
I remember dividends and CGT form the top slice of income, is there an order of taxation eg salary, savings, dividends, CG etc? How do they fit in with each other and where do the allowances fit in? It seems personal pension contributions can help in increasing your tax band for both income and capital gains I did put in another post i am no tax expert so hopefully i'm not teaching you bad habits or somebody else will have better info.But your question about the order of tax i assume would depend on if you are working and using your personal allowance of tax free income (£11850 from April) But think i am right in saying using your order you would be taxed on salary the savings would come under the £1000 allowance.The income/divs from shares & funds would have been another £5000 but dropping to £2000 in April. The CGT is only a problem if selling for more then the allowance- you could make a very big gain on a share but until you sell its only on paper also the rate of tax is different on shares/property etc to your normal rate if you do have to pay.So hence try to use an ISA and make use of Bed & ISA and some make use of a partner.With a pension i understood as long as you did not go over certain contributions its tax free and also gets the govt. top up but pensions are complicated in their own right so advice maybe good. Taking the pension will depend on the rules when you start. I will now wait for someone to put me right on any mistakes(but hopefully not the tax man)
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james100
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Post by james100 on Mar 24, 2018 14:23:29 GMT
Can I check some figures? If CGT allowance is £11,700 and assuming a 8% return (is that reasonable?) on investments not in a tax wrapper Then if able to in some way bed and breakfast (spouse/ISA/buy similar alternative) £11,700/8% = £146,250 So approx £150k of investments could receive a 8% CG per year without having to pay any CGT? Depends on the specific investment, but FTSE 100 averaged about 5.5% capital growth p.a. over the past 20 years (+ averaged about 4.5% p.a. dividend). But the CGs are always wildly non-linear...if they were your number for a FTSE100 tracker would be more like 210K to max out the new CG allowance, plus 9K dividend (7K falling outside the new dividend allowance, so set against dividend tax rates or, possibly personal allowance depending on your specific situation). p.s. not a tax adviser etc.
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james100
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Post by james100 on Mar 24, 2018 14:53:25 GMT
I remember dividends and CGT form the top slice of income, is there an order of taxation eg salary, savings, dividends, CG etc? How do they fit in with each other and where do the allowances fit in? It seems personal pension contributions can help in increasing your tax band for both income and capital gains AIUI conventionally, yes, dividends are taxed as top slice because of the discrepancies between tax bands/rates. There are exceptions to this though depending of individual situations and you have the right to structure the reporting of your affairs to minimize your liability. As to how they all fit together, well it's complicated because UK tax policy bends and layers with the political winds, resulting a framework that is packed with holes, inconsistencies and nonsensical quirks, some which are full-blown punitive at certain income points. Whilst the gov.uk website is good starting point, the HMRC manual (on-line) is worth the yawns because that defines how your submissions will be assessed in detail.
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Not sure if its what your asking or you may even know but you only pay the CGT if you make a profit on selling.By hopefully using bed & breakfast for £20000 per year and or gifting to a spouse you maybe able to get all your assets under a tax free wrapper before you need to sell for a profit and also keeps any income tax free.Also the rate of tax on CG is not the same as your normal rate so may not be as big a problem as you think.
