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, 2019 at 10:22
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. Aug 28, 2019 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!) Aug 28, 2019 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. Aug 28, 2019 at 15:54
1@TripeHound actually I think you're right, see gov.uk/hmrc-internal-manuals/capital-gains-manual/cg10246 Aug 28, 2019 at 16:23