W6 - Income Tax + CGT

Income tax - steps to calculate (x7)

1. Calculate total income

2. Calculate net income

3. Deduct any PA → Taxable income

4. Calculate any PSA available + apply

5. Split taxable income into 1. Non savings, 2. Savings, 3. Dividend income (+tax in this order)

6. Apply rates (nil + tax ones)

7. Add together all these tax amounts → total income tax liability

Income tax - reliefs available

1. Pension scheme contributions

2. Interest paid on any qualifying loan (i.e. for partnership/ business / shares)

Income Tax - Personal Allowance (PA)

• what income do you use?

• Max amount?

**Don’t need to use thresholds?

• net income

• £12,570

Income Tax - Personal Savings Allowance

• what income do you use?

• TAXABLE income

IS a gift of shares releavnt to income tax?

No → just if sell this then any gain = CGT applies

What is the total income

= all money she has received in

What is net income

You have to minus any reliefs (pension allowance/ interest on qualifying loans) from the total income. → to reduce this down for tax

If i.e. £2000 savings income and £500 of this is at 0% tax rate then how does this work?

Still must use whole £2000k to use up the tax bands (just will be different rates applying to bits w/in this)

CGT Formula/ Calculation Steps

X6

1	Sale proceeds/ market value
2	Minus/ less disposal expenditure = net sale proceeds
3	Minus/ less initial expenditure + subsequent enhancement expenditure = total chargeable gain
4	Minus/ less any losses made
5	Minus/ less any annual allowance
6	Apply rate

CGT Rate

• if taxable income is less+ taxable chargeable gains is less than the basic rate tax threshold

Tax at lower rate

CGT Rates

• what if taxable income is less than the basic rate threshold but taxable income + taxable chargeable gains exceed the basic rate tax threshold?

Apportion the taxable chargeable gains → part of gains w/in unused basic rate tax band charged at the lower rate

Then excess → taxed at the higher rate

CGT Rates

If taxable income exceeds the basic rate tax threshold?

Tax at the higher rate (unless BADR/ IR reliefs can be claimed)

Chargeable assets

= all those which are excluded : what are excluded assets x3?

1. Private residence (PRR)

2. Privately owned cars (including vintage one)

3. Currency (UK/ foreign)

Chargeable Disposal

• what x2?

Sale or gift

What if chargeable disposal is a gift?

HMRC will substitute the market value

CGT Relief - BADR

Qualifying Disposals

CGT Relief - BADR

Requirements

CGT Relief - Investors’ Relief

BPR Tax Relief

• available for what transfers?

• Must own for?

• What type of assets dont count? ie..a …

  • Exception to this example?

• Examples of things which would qualify

• life & death

• At least 2 years prior

• Assets held as investments - i.e. a holiday home let out

  • Exception - if holiday home provides some other service

• Workshops/ plant/ machinery

Rollover Relief?

• when does this apply/ what situation?

• Examples of non qualifying assets

• Sell one asset + buy another + both of these assets must be qualifying assets

• Shares, cars = not qual.