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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Tony I have a portfolio of 100000 which i purchased for 25000

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Tony
I have a portfolio of 100000 which i purchased for 25000 5 years ago. What is the most tax efficient way to cash them in to pay some of my mortgage off?
Thanks
Submitted: 10 months ago.
Category: UK Tax
Expert:  Tony Tax replied 10 months ago.
Hi.

What does the portfolio consist of, shares, property, other investments? What rate of income tax do you pay?
Customer: replied 10 months ago.

Hi


All shares.


I am on the limit of being a 40% taxpayer.
I have recently put them as a joint account with my wife.


My wife is on the limit too.


 


Simon

Expert:  Tony Tax replied 10 months ago.

Thanks.

Can you tell me what the inherent gain is please.

Expert:  Tony Tax replied 10 months ago.
Ignore my previous post.

I'm drafting an answer now.
Expert:  Tony Tax replied 10 months ago.
Hi again.

You would probably both be paying CGT at 28% on the gains if you liquidated the portfolio in one tax year give that you are borderline 40% income tax payers.

Given that the portfolio is in joint names, you are each sitting on gains of £37,500. If you realised those now, the first £10,900 for each of you would be tax free so that would leave £26,600 chargeable at 28%. You would each have a CGT liability of £7,448.

There aren't many tax planning opportunities for this type of situation I'm afraid. You might consider liquidating half the portfolio in the current tax year and half in the 2014/15 tax year which starts on 6 April 2014. Assuming the overall gains were still £37,500 for each of you and you were still 40% taxpayers, you would each reduce your overall CGT exposure by £3,052 each by utilising an additional CGT exemption (£10,900 x 28%). However, you risk a stock market correction the longer you wait.

If you could contrive to reduce your incomes by about £27,000 each you would pay CGT at 18% on your gains but unless you run your own business and are able to control what you earn, that idea probably isn't viable.

I hope this helps but let me know if you have any further questions.
Customer: replied 10 months ago.

Tony


many thanks.


I have my own business and we take dividends as well up to 40K a year.


Will this affect your last reply?


I will not ask anymore.


And send you positive feedback and the money.


Simon


 

Expert:  Tony Tax replied 10 months ago.

Ask as many questions as you like.

You clearly have a limited company as you take dividends. Take a look here for information on how dividends are taxed.

In the current tax year, assuming you have no salary, you could take up to £37,305 in dividends, profits allowing, and pay no personal tax. The £37,305 grosses up to £41,450 which is the sum of the personal allowance of £9,440 and the 20% tax band of £32,010. Dividends are treated as basic rate tax paid.

If you can reduce your income to around £14,500 gross in 2013/14, after deduction of the personal allowance of £9,440, you will have about £26,950 of the 20% tax band left which would mean your taxable gains of £26,600 would be taxed at 18% instead of 28%.

Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 14088
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
Tony Tax and other UK Tax Specialists are ready to help you

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