CGT - Can I just check my understanding
Discussion
Hi all,
I have never had a need to pay Capital Gains Tax and only have a basic understanding of things. I'm also aware that changes are expected in the next budget.
A year or so ago I took advantage of my employers company share save scheme when share prices were on the floor. I maxed out with £250 per month over 3 years. The share price is currently 250% up on the option price and I was hoping, quite realistically, to treble the total £9,000 savings.
The sacrifice is, of course, the £250 taken from my salary each month, which can sometimes be a bit of a stretch, whilst the prospect of this paying out is encouraging me to stay in a job I've grown to dislike.
So, if I understand things correctly, at present I have a limit of £10,100 and would pay 18% flat rate on gains. This is fine as I could cough up a few quid on realising the gains or, more likely, retain some shares until the following year.
However, if the rate is increased to 40% and the allowance all but abolished, I could be facing something like a potential £7,000 CGT bill with little ability to negate this by selling shares over a period of time. Also, even if indexation of some kind was reintroduced, this will be irrelevant as I will be buying the shares the same day as I sell them (price being right of course).
Have I got this right? I'm a basic rate tax payer if that's relevant at all.
Thanks for any clarification.
I have never had a need to pay Capital Gains Tax and only have a basic understanding of things. I'm also aware that changes are expected in the next budget.
A year or so ago I took advantage of my employers company share save scheme when share prices were on the floor. I maxed out with £250 per month over 3 years. The share price is currently 250% up on the option price and I was hoping, quite realistically, to treble the total £9,000 savings.
The sacrifice is, of course, the £250 taken from my salary each month, which can sometimes be a bit of a stretch, whilst the prospect of this paying out is encouraging me to stay in a job I've grown to dislike.
So, if I understand things correctly, at present I have a limit of £10,100 and would pay 18% flat rate on gains. This is fine as I could cough up a few quid on realising the gains or, more likely, retain some shares until the following year.
However, if the rate is increased to 40% and the allowance all but abolished, I could be facing something like a potential £7,000 CGT bill with little ability to negate this by selling shares over a period of time. Also, even if indexation of some kind was reintroduced, this will be irrelevant as I will be buying the shares the same day as I sell them (price being right of course).
Have I got this right? I'm a basic rate tax payer if that's relevant at all.
Thanks for any clarification.
Your basics are right, however there could be some form of taper relief reintroduced for company assets. The talk is that this will include shares owned in the company you work for. However, if it is line with taper relief that was abolished a year or two ago then you would need to hold the shares for at least a year to get any relief anyway.
If allowances go down and rates go up then you will very likely end up paying CGT. As a basic rate payer this may only be at 20% if CGT rates fall in line with income tax rates. Bear in mind that a large gain may push you into the higher tax band.
If allowances go down and rates go up then you will very likely end up paying CGT. As a basic rate payer this may only be at 20% if CGT rates fall in line with income tax rates. Bear in mind that a large gain may push you into the higher tax band.
LC23 said:
Your basics are right, however there could be some form of taper relief reintroduced for company assets. The talk is that this will include shares owned in the company you work for. However, if it is line with taper relief that was abolished a year or two ago then you would need to hold the shares for at least a year to get any relief anyway.
If allowances go down and rates go up then you will very likely end up paying CGT. As a basic rate payer this may only be at 20% if CGT rates fall in line with income tax rates. Bear in mind that a large gain may push you into the higher tax band.
Thank youIf allowances go down and rates go up then you will very likely end up paying CGT. As a basic rate payer this may only be at 20% if CGT rates fall in line with income tax rates. Bear in mind that a large gain may push you into the higher tax band.
It is very difficult to predict what the new CGT rules are going to be and because of that, any advice given at this juncture is bound to be technically speculative.
Before 6 April 2008. CGT was at 40% as well - but there were two techniques applied to ensure that gains relating to inflation and sales of business assets - Taper Relief and/or Indexation.
If we are to see a return to a CGT rate based on the individual's top rate of Income Tax rather than a separate specific CGT rate, then Indexation or Taper Relief must be reintroduced for individuals (it never went for limited companies).
Before 6 April 2008. CGT was at 40% as well - but there were two techniques applied to ensure that gains relating to inflation and sales of business assets - Taper Relief and/or Indexation.
If we are to see a return to a CGT rate based on the individual's top rate of Income Tax rather than a separate specific CGT rate, then Indexation or Taper Relief must be reintroduced for individuals (it never went for limited companies).
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