Question
I should be grateful if you could comment on CGT liability on foreign shares.
If I buy foreign shares using a UK broker, and later sell making a gain, do I pay Capital Gains tax in the countries in which the shares are based? Or does my liability rest solely in the UK? I am thinking of the US and Jersey.Answer
If you are a UK resident then you are liable to UK capital gains tax on your worldwide assets. The only exception is if you're a non-UK domicile (possible if, for example, you were born overseas) in which case you can choose to only be taxed on overseas gains you bring into the UK - but you'll have to pay an annual £30,000 tax charge for the privilege (introduced by the Government to discourage tax avoidance/evasion).
Given you'll be taxed in the UK, the key is to avoid paying additional tax on gains in those countries where you hold investments.
Fortunately, most overseas countries don't hit UK resident investors with capital gains tax thanks to reciprocal tax agreements. So this is seldom a problem for most investors.
In your case the US doesn't deduct any gains tax for UK resident investors and there's no capital gains tax system in Jersey.
However, if you did end up being taxed on gains by an overseas country then you should be able to offset this against any UK capital gains tax owed. For example, suppose you make a £20,000 gain overseas on which £2,000 of tax has been deducted. You can offsetany unused UK annual gains allowance (currently £10,100), which in this example means a UK tax bill of £1,782 if you're a basic rate taxpayer (20,000 - 10,100 x 18%) and £2,772 if you're a higher rate taxpayer (28% CGT rate).
If a basic rate taxpayer you'll have no further UK tax to pay, although you can't reclaim the extra £218 overseas tax paid (in the UK at least). If a higher rate taxpayer you'll have a further £772 of UK tax to pay.
I should be grateful if you could comment on CGT liability on foreign shares.
If I buy foreign shares using a UK broker, and later sell making a gain, do I pay Capital Gains tax in the countries in which the shares are based? Or does my liability rest solely in the UK? I am thinking of the US and Jersey.Answer
If you are a UK resident then you are liable to UK capital gains tax on your worldwide assets. The only exception is if you're a non-UK domicile (possible if, for example, you were born overseas) in which case you can choose to only be taxed on overseas gains you bring into the UK - but you'll have to pay an annual £30,000 tax charge for the privilege (introduced by the Government to discourage tax avoidance/evasion).
Given you'll be taxed in the UK, the key is to avoid paying additional tax on gains in those countries where you hold investments.
Fortunately, most overseas countries don't hit UK resident investors with capital gains tax thanks to reciprocal tax agreements. So this is seldom a problem for most investors.
In your case the US doesn't deduct any gains tax for UK resident investors and there's no capital gains tax system in Jersey.
However, if you did end up being taxed on gains by an overseas country then you should be able to offset this against any UK capital gains tax owed. For example, suppose you make a £20,000 gain overseas on which £2,000 of tax has been deducted. You can offsetany unused UK annual gains allowance (currently £10,100), which in this example means a UK tax bill of £1,782 if you're a basic rate taxpayer (20,000 - 10,100 x 18%) and £2,772 if you're a higher rate taxpayer (28% CGT rate).
If a basic rate taxpayer you'll have no further UK tax to pay, although you can't reclaim the extra £218 overseas tax paid (in the UK at least). If a higher rate taxpayer you'll have a further £772 of UK tax to pay.
Read this Q and A at http://www.candidmoney.com/questions/question332.aspx
Capital Gains Tax can be very punitive if not planned for. Careful planning for Capital Gains Tax can result in significant saving of the tax and result in more of the disposal proceeds in your pocket and as less as possible of the capital gains tax. As your appointed tax advisors we would prepare your capital gains tax computations, making sure all your entitlements of claims to reliefs and exemptions are made.
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