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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4790
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I'm about to sell my company shares (I left the company

Resolved Question:

Hi,
I'm about to sell my company shares (I left the company two years ago so I lose my entrepreneur's relief). I want to know if I sell in one year if the actual gain I make is added to my income and I pay at the higher rate or if it is only classed as a gain and therefore I pay 18% as I am a basic tax payer.
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.

Hello and welcome to the site. Thank you for your question.

Any gain made by you is chargeable to CGT at 18%, 28% or a combination of both, depending on your taxable income including the gain in the year of sale.

Example ..
Taxable income after personal allowance (42,385-10,600) = £31,785
Gain on sale of shares after gains allowance of £11,100 = £10,000

As your income is already at the maximum level of threshold at basic rate, your gain will be taxed at 28%.

if on the otherhand, your taxable income after personal allowance is £21,785, then the gain will be taxed at 18% because income plus gain is up to £31,785.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 1 year ago.

Thank you,

Can I ask advice based on figures.

I want £70k net for my shares in my former company.

From rental income I get £18k a year.

To be most tax efficient can you let me know what they would need to pay in a) 1 year, b) 2 years, and c) 3 years, for me to get my net figure.

Thanks so much,

Jan

Expert:  taxadvisor.uk replied 1 year ago.
Jan, thank you for your reply.

Assuming the tax allowances/rates remain the same.

If your only income is £18k then your taxable income after personal allowance is (18,000-10,600) £7,400.
You can have this go up by another (31,785-7,400) £24,385 and your CGT would be 18%.
This equates to a capital gain of £35,485 before gains allowance.

So if you wish your CGT to remain at 18%, you should sell the shares in two instalments netting you £35k in each year.

I hope this is helpful.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4790
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Expert:  taxadvisor.uk replied 1 year ago.
Jan, just for clarity

When I say "you should sell the shares in two instalments netting you £35k in each year." I mean in two tranches .. sell half in year 1 and other half in year 2.

Many thanks

Expert:  taxadvisor.uk replied 1 year ago.
I thank you for accepting my answer.

Best wishes.

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