Question
if profits are taken from investment funds within a tax year up to the tax free allowance of 10,100, for capital gains. Are the profits taken then still liable to ordinary income tax? If they are can any losses from investment funds be used to reduce any gains and tax owed.
Regards
Simon.Answer
Capital gains tax and income tax are two separate taxes, I can’t think of any situations when both would apply to the same profit – it’s either one or the other.
The gains you make when selling most investments, e.g. shares, funds and second homes, are subject to capital gains tax. Gains up to the annual £10,100 allowance are tax-free, any excess is taxed at 18% or 28% depending on whether you’re a basic or higher/top rate taxpayer.
Income tax is more likely to apply to any income you receive from the investments, e.g. dividends, interest or rental income.
[note: income tax can apply to gains from some offshore fund investments that don’t have ‘reporting’ or ‘distributor’ status, but you’re generally unlikely to encounter these with the exception of some exchange traded funds (ETFs)].
If you make losses on investments then they can be offset against future gains, but you must notify the taxman (HMRC) of the losses if they occurred in a tax year previous to the one in which they’re being used to offset gains. Take a look at my answer to this earlier question for more details about this.
if profits are taken from investment funds within a tax year up to the tax free allowance of 10,100, for capital gains. Are the profits taken then still liable to ordinary income tax? If they are can any losses from investment funds be used to reduce any gains and tax owed.
Regards
Simon.Answer
Capital gains tax and income tax are two separate taxes, I can’t think of any situations when both would apply to the same profit – it’s either one or the other.
The gains you make when selling most investments, e.g. shares, funds and second homes, are subject to capital gains tax. Gains up to the annual £10,100 allowance are tax-free, any excess is taxed at 18% or 28% depending on whether you’re a basic or higher/top rate taxpayer.
Income tax is more likely to apply to any income you receive from the investments, e.g. dividends, interest or rental income.
[note: income tax can apply to gains from some offshore fund investments that don’t have ‘reporting’ or ‘distributor’ status, but you’re generally unlikely to encounter these with the exception of some exchange traded funds (ETFs)].
If you make losses on investments then they can be offset against future gains, but you must notify the taxman (HMRC) of the losses if they occurred in a tax year previous to the one in which they’re being used to offset gains. Take a look at my answer to this earlier question for more details about this.
Read this Q and A at http://www.candidmoney.com/questions/question399.aspx
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