tax rate question

[vik2001]

Im trying to figure out whether im going to be a high rate 28% or low rate 18% tax rate payer on CGT when selling my property.
is this how I work it out for 2017/18:

Work Salary before tax deductions is £40,000
Personal Allowance 2017/18 is £11,500
£40000-11,500 = £28500

is that how I work it out, sorry im a novice at tax..
does that mean I fall into basic rate so pay 18% on CGT?

also if I have additional income for 2017/18 does that mean I add it onto the £28500 ?
thanks

[emwithme]

You will pay 18% on some (the amount that takes you to the higher rate threshold, so the first £32,000 of taxed income - the amount that's taxed if it's income at 20%) and then 28% on the rest.

For example, if your total earned income is £40,000 and your capital gain (after allowances) is £100,000 you would pay:

Income tax:

First £11,500 @ 0% = nil
Next £28,500 @ 20%= £5,700

This leaves £3,500 of your basic rate band available

Capital Gains:

You would pay £3,500 @ 18% = £630
Remaining £96,500 @ 28% = £27,020

Total capital gains tax payable = £27,650.

If your earned income was more than £43,000 (or whatever the threshold was in the relevant year for paying higher rate tax) then the entire chargeable gain would be at 28%.

If you had savings income (or income from non-property investments or dividends) this would use up more of your basic rate band too.

The order that HMRC allocates the income is:

Earned income (or trading income if you are a sole trader/in a partnership)
Savings/Dividend Income
Income from Capital Gains

[jpkeates]

Are you sure that's right?

My understanding was that you add the capital gain (in full) to your taxable income and that sets the tax rate for the CGT.

So you add £89k (total £100k less the £11k annual capital allowance) to the income that's taxable - (in this case, £28.5k) the total of which is over the higher rate threshold, so the entire taxable gain would be taxed at 28%.

So the CGT would be £24,920

I'd be delighted to be wrong, but that's been my understanding...

also if I have additional income for 2017/18 does that mean I add it onto the £28500 ?

Yes.

[leaseholder64]

https://www.gov.uk/capital-gains-tax/rates seems to confirm jpkeates worst fears.

I would add that there are number of things, e.g. pension contributions not paid by the employer, and gift aid, that you can offset against the work salary. Additional income must be added, although, if that was from rent, various expenses can be set off against it.

[emwithme]

jpkeates not according to my accountancy textbook! (And I got 86% in the Personal Tax module so I'm pretty confident). I can dig it back out of the box tomorrow to double check though...

[The reason I didn't take off the £11.1k capital allowance was pure laziness - although I did say that I'd assumed the gain AFTER allowances was £100k]