I was wondering if the Capital Gains tax-free allowance of £12,300 resets April 6th, so if I make (for instance) £4,000 between now and April 5th I don’t pay any taxes on it?
Maybe it’s a stupid question but I preferred to be sure before doing something wrong.
Yes, the allowance resets on 6 April. The ISA allowance for 21/22 is another £20,000. The Capital Gains tax free allowance for 21/22 is unknown and might go up or down from its present level of £12.300.
Think @Richard.W’s referring to Isas with the £20k, but the capital gains allowance also resets with the turn of the financial year. A point worth noting: capital gains tax is only payable when you sell a security, so you can’t use the allowance for unrealised gains, if that makes sense.
As above the allowance does reset at the start of the next financial year (6th April). The allowance is £12,300 this year but will increase slightly next year (increases normally by around £300 so would expect the new amount to be £12,600 unless Rishi in his budget announcement makes some form of radical change to claw back all the money they have spent during the pandemic).
So yes the £4,000 you make will be tax free and therefore you will not need to submit a tax return for this gain.
If the profit is made by selling shares in an ISA then this is tax free regardless as its not subject to capital gains.
Sorry. Yes, the Capital Gains tax free allowance is £12,300 for 20/21. The allowance for 21/22 is as yet unknown. One of the recommendations made by Bill Dodwell – OTS Tax Director was to remove or at least reduce the CGT annual allowance. The Chancellor will probably be talking of this on 3 March.
Thanks Rich. It’s fully clear now.
One last thing: if for example I have a profit of £13k of NIO (that’s not my profit but it’s to understand better the concept) but it’s a long term play so I won’t be selling it for a couple of years, this is not considered every year as a capital gain so I don’t have to pay tax until when I sell it in 2025 for example, right?
Yes, there is no gain until you sell. The current £12,300 allowance is “use it or lose it”, so you should look for a way to use that up if you can. If you had £13,000 gain in NIO you could sell enough to use up the £12,300, and immediately rebuy in your spouse’s account. Wait > 30 days and then reverse the transaction.
So if you were wanting to sell you could sell £12,300 this year then £700 after 6th April to avoid tax.
However one thing to keep in mind also is A capital loss can be offset against capital gains of the same tax year, but cannot be carried back against gains of earlier years. If you have an unused capital loss , this can be carried forward indefinitely against gains of future years.
You have to be careful, since once you declare a loss on your self-assessment it must be used in full before the CG tax free allowance can be applied. So 13000 gains and 5000 declared losses mean a net of 8000 gains and no tax. But then you have not made best use of the tax free allowance. You might wish to apply just 700 of the declared losses, to being new gain to just 12,300, and carry-forward losses of 4300, but that is not allowed. But what you can do is simply not declare some of the losses. Losses can be declared up to 4 years after they occurred.
Only if the losses are in the same year must you use the full amount before applying the CGT allowance, however if the losses were in past years the usage of losses brought forward is restricted, so that the usage of the annual exemption is maximised
Or as you said above you can use the CGT allowance for married couples by gifting them to a spouse to effectively double your CGT allowance.
I was just making @lsteira12 aware that there was other options than the straight having to pay if over the allowance
I am New in Trading. I was wondering if its only capital gain tax you pay or do you also pay income tax? And if so, where and when you declare income tax?
Welcome to the community. Have you searched the forum? There are many helpful discussions of tax on capital gains and dividends. The answers differ depending on your tax residency so you need to tell us that.
I am UK citizen on a standard income tax code - 1250L.
P.S. I couldn’t find about income tax but I believe there should be sth that I need to pay.
Taxes are explained well here. Read this first: the three headings under Tax on Shares.
If you trade from ISA? You don’t pay tax whatsoever as long as your initial investment is 20k or less until 4th April. If you trade with the normal investing account? You pay tax depending on your tax bracket. Simple.
Thanks Richard! Very clear now
I understand ISA. I am more interested in general account since I have some shares there (as ISA does not include them). So I understand the capital gains. I am just wandering how the earnings on general account affect my annual income tax. I believe since my work place is utilising my income tax allowance. Any other income should be taxed at 20%. So my question do i need to file a report on income received in general account or will HMRC do some deductions from my salary ?
Your questions can be answered by reading the link to the HMRC page I have given above. That is more reliable a way to educate yourself than asking people on the forum. You may owe dividend tax if you have more than £2000 of dividends. The tax rate can be 7.5%, 32.5% or 38.1%