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If a UK resident makes a capital gain of £25000 and has a state pension of £6000 are they liable for any UK tax, given that there is a capital gains allowance and a tax allowance?

  • Which tax year, as that will affect the exact tax bands? (Though the answer is there'll be a tax liability regardless, as the total income is well above the standard tax allowance + capital gains allowance) – GS - Apologise to Monica Aug 27 at 10:22
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Depending on the tax year, the Capital Gains tax allowance is about £12,000 and the personal income tax allowance is about £12,500.

It looks like you can't count unused personal income tax allowance against capital gains:

Unused Income Tax reliefs and allowances cannot be set against the net gains.

So there'll be tax owing on about £13,000 - at a rate of 10%, or 18% if the gain is from residential property.

To calculate the exact tax, follow the steps listed at https://www.gov.uk/capital-gains-tax/rates:

  • Subtract the personal allowance (e.g. £12,500 for 2019-20) from your pension (£6,000). If this is a negative number, as in this case, treat it as 0.
  • Deduct the Capital Gains allowance (e.g. £12,000) from the gain (£25,000) to get £13,000.
  • Add it to your taxable income to check what tax band the result falls into. In this case you get £13,000 which is well within the basic rate band. You'll pay 10% or 18% tax on this amount.
  • I'm not (yet) convinced that unused Personal Allowance carries over like this (i.e. taxable income is negative), and even if it can be carried over, I think that the calculation at step 4 of the page you link is only to determine which CGT band you fall under (10/18% vs 20/28%)... I not convinced that it can actually reduce the amount that is charged at that rate. But I could easily be wrong... I'll dig. – TripeHound Aug 28 at 14:36
  • So far I've found Can unused personal allowances be set against a chargeable capital gain? on Taxation.couk which asks an almost identical question, but unfortunately cuts-off just after indicating conflicting advice, but before providing an answer... (the full article is only available to subscribers!) – TripeHound Aug 28 at 15:10
  • @TripeHound I'm pretty sure it does, because AIUI the principle is that capital gains are taxed as income except that there's an extra allowance and the rate is lower. – GS - Apologise to Monica Aug 28 at 15:54
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    @TripeHound actually I think you're right, see gov.uk/hmrc-internal-manuals/capital-gains-manual/cg10246 – GS - Apologise to Monica Aug 28 at 16:23

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