CGT Calculation?

Omer AYDINLI
Omer AYDINLI Registered Posts: 19 Dedicated contributor 🌟 🐵 🌟
Hi All Everyone,

I am really confused on calculation of Capital Gains Tax. When it will be %18 and %28 ???
I understood that if the figure is in higher or additional rate band then will be calculated %28
What about if you have other taxable income as well ?

For Instances:

1. Taxable Income:52,700 , ER Gains:27,600 , Non ER Gains:4,200 , Allowable Losses: 1,000 Calculation?

2. Taxable Income:32,570 , Non ER Gains:19,000 , Allowable Losses:700 Calculation ?

Many Thanks,

Omer

Comments

  • Nps
    Nps Registered Posts: 782
    Hello,

    1. Taxable income is already over the basic rate threshold so any CGT not subject to Entrepreneur's Relief will be taxed at 28%. As you have 27600 of ER gains, these will be taxed at 10% (these gains are taken into account for the purposes of checking which band further gains are in but as we are already in higher rate territory and not likely to go over it, you don't need to worry).

    You can use your allowable losses in the most tax efficient way so in this example you would use them against the 4200 of non ER gains, leaving you with 3200 to be taxed at 28%

    2. Taxable income of 32570 leaves you with 1800 of basic tax band left. You would take the 700 allowable losses off your gains of 19000 leaving you with 18300. 1800 of this will be taxed at 18% using the remainder of your basic tax band, and the remainder will be taxed at 28%.
  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    Nps1976 wrote: »
    Hello,

    1. Taxable income is already over the basic rate threshold so any CGT not subject to Entrepreneur's Relief will be taxed at 28%. As you have 27600 of ER gains, these will be taxed at 10% (these gains are taken into account for the purposes of checking which band further gains are in but as we are already in higher rate territory and not likely to go over it, you don't need to worry).

    You can use your allowable losses in the most tax efficient way so in this example you would use them against the 4200 of non ER gains, leaving you with 3200 to be taxed at 28%

    2. Taxable income of 32570 leaves you with 1800 of basic tax band left. You would take the 700 allowable losses off your gains of 19000 leaving you with 18300. 1800 of this will be taxed at 18% using the remainder of your basic tax band, and the remainder will be taxed at 28%.

    Agreed
  • welshwizard
    welshwizard Registered Posts: 465
    Just a quick note:

    if you're talking about Personal Tax, it may be worth looking at the Guidance for the unit because the Guidance document states:

    Capital gains tax:

    Learners must appreciate who and what is taxable under this heading. The impact that relationships between connected persons have on disposal of capital assets needs to be understood.

    Detailed computations can be expected on chargeable assets being disposed of, including enhancement expenditure, part disposals and chattels. Learners must expect to be examined on share disposals, including matching rules, bonus issues and rights issues.

    Excluded topics:
    Takeovers and reorganisations
    Business reliefs such as rollover, gift and entrepreneurial
    Small part disposals of land
    Small part disposals rules as applicable to rights issues

    Hope this helps
  • Omer AYDINLI
    Omer AYDINLI Registered Posts: 19 Dedicated contributor 🌟 🐵 🌟
    Hello Nps1976 ,

    I understand that Entrepreneur's Gain entirely irrelevant to CGT. If the total taxable income exceeds the threshold Non ER Gains will be %28 but ER Gains still will be stood on %10
    What about deducting the loss, initially will be deducted from non er gains???

    Many Thanks for your help.
  • Nps
    Nps Registered Posts: 782
    I'm not sure I understand your question but I'll try and answer what I think you are asking.

    Entrepreneurs Gain/Relief is definitely relevant to CGT.

    ER will always be 10% regardless of any other gains, up to the maximum (which is currently £10,000,000). Any further gains over this threshold which would normally have been subject to ER will be taxed at the normal rates. However, as ER is dealt with first, even though they are only being taxed at 10%, they are still using up the tax bands, so you may end up with a situation where you have some CG's taxed at 10% and some at 28%, but none at 18%.

    So if you had £10,100,000 of CG's, all eligible for ER, the first £10,000,000 would be taxed at 10%, and the remaining £100,000 at 28%
    If you had £40,000 worth of gains and £30,000 of them were eligible for ER, £30,000 would be taxed at 10%, £4,370 would be taxed at 18%, and the remaining £5,630 at 28%.

    You are allowed to use losses in the most tax efficient way, so it would not make sense to use them against gains subject to ER as you would only be saving 10% tax. You are better off using them against non-ER gains and saving yourself 28% tax.
  • omega man
    omega man Registered Posts: 283
    Nps- my BTX book says ER is £10m lifetime allowance,not £1m.
  • Nps
    Nps Registered Posts: 782
    Yes it is £10m well spotted, don't know where £1m came from, I even checked the HMRC website at the time to check it hadn't changed since I studied it! Will amend now.

    Note to self, don't make forum entries past bedtime!
  • omega man
    omega man Registered Posts: 283
    It is only because i have my BTX exam on Feb 20th, you obviously need your beauty sleep early then!!!!
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