tax rate question

  • Filter
  • Time
  • Show
Clear All
new posts

    tax rate question

    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 ?

    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


      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...

      Originally posted by vik2001 View Post
      also if I have additional income for 2017/18 does that mean I add it onto the £28500 ?
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


        #4 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.


          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]


          Latest Activity


          • Reply to Advice
            by SouthernDave
            I started my limited company a year before buying the first property, then bought a second 2 months later, a third 3 months after that, a fourth 5 months after that and so on to where I am now. Our lenders have never said they want a separate company per property. Ive never heard of that, if it were...
            23-01-2022, 17:40 PM
          • Advice
            by jhoggard

            I currently have a property rented out in my own name with a fair bit of equity around 50% LTV this is actually a repayment mortgage which i'm looking to switchover to a interest only. When i do this i'm also taking money out of the property to put towards another which i'm looking...
            20-01-2022, 14:25 PM
          • Reply to Advice
            by jpkeates
            I don't think we disagree.

            The OP has one property and is looking to buy a second.
            At that point in that business, lenders will want a company per property.

            There's a point where that ceases to be the case, when the portfolio gets big enough, or, presumably when someone...
            23-01-2022, 17:34 PM
          • Reply to Advice
            by SouthernDave
            i concur with this, once you get over 4 properties, they consider you to be a portfolio landlord and want to start seeing cashflow forecasts before lending to make sure the company is buoyant. Directors guarantees each time but no limits on number of properties or number of dofferent lenders....
            23-01-2022, 16:50 PM
          • Reply to Advice
            by JamesHopeful
            This is not true in my experience. I currently have eight properties in the same company, across a number of different mainstream BTL lenders, and none of them have batted an eyelid at the number.

            Where I have known lenders worry about the company is it doesn't have the correct SIC code...
            23-01-2022, 16:28 PM
          • Reply to Advice
            by theartfullodger
            Depends to a great degree on tax regulations over the coming years. We only know what the rules are today, not what they'll be in future e.g. when you retire

            I expect chancellors to cut back on the advantages of people owning property through companies (well, wouldn't you if you were chancellor)...
            22-01-2022, 13:06 PM
          • Reply to Advice
            by Gordon999
            1. No. You have not sold the property yet

            2. 19% on profit by company.

            3. Seek advice from accountant.
            22-01-2022, 09:36 AM
          • haring inherited property
            by halfax
            i am inheriting a property and would like to place half in my grandsons name.
            as anyone done similar?...
            19-01-2022, 18:12 PM
          • Reply to haring inherited property
            by halfax
            thanks for help to everyone who replied, great forum
            21-01-2022, 18:55 PM
          • Reply to Looking for tax / financial advice for a BTL /holiday let long-held portfolio
            by ifallelsefails
            I watched a webinar from Landlord studio and this man Tony Gimple was featured in it. Have a look at his Linkedin profile:
            He has a website whereby he consults exactly to your situation:
            21-01-2022, 17:13 PM