Cash in, without paying tax
So the sun has come out and Spring has sprung. If only the green shoots of recovery were coming through as well as the daffodils. If you are still feeling the pain of the recession, perhaps you are thinking of selling something to keep your coffers topped up? The only problem with that plan is making sure you don’t also fill the Treasury’s pockets with capital gains tax.
Capital Gains Tax (CGT) is payable on the disposal of assets. These need to be declared on a tax return, and not having one is not a proper excuse- you need to ask for one. Tax is payable at a rate of 18% or 28% depending on your income (not including the 10% rate for entrepreneurs’ relief gains) and is due on 31 January next following the end of the tax year (ie for 2011/12 tax would be due 31 January 2013)
But there are things you can do to realise cash and keep it all in your pocket. So here are BitterWallet’s Top 5 tips for making, and keeping, some quick cash:
1. Use your annual exemption. The CGT annual exempt amount for 2011/12 is £10,600 so you can make gains of up to that amount tax-worry free. Note that this is not proceeds of sale, but profit on the deal.
2. Sell cheap chattels. Do you know why the taxman doesn’t have a problem with eBay? Well, apart from those who use eBay as a business, most other people sell chattels- smaller, moveable items. If they are not expected to last for 50 years (is anything these days?) they are completely exempt, and if they are exepcted to hang around, like say an antique chair, they are still exempt provided they cost, and were sold for less than £6,000. So go raid your Grandma’s house...
3. Sell your car. Cars are specifically exempt from CGT so you can pocket all the cash. Or spend it on something nice. Or beer.
4. Invest in Gilts or ISAs instead of shares. Gilts are essentially loans to the Government with (normally) a fixed repayment date range and coupon rate. Some lucky chaps who invested in these a few years ago are still getting rates of 11% or more on the nominal £100 tranches of coupon. And if you sell them at a gain (before they mature) they are CGT free. Similarly if you have a stocks and shares ISA, shares can be bought or sold within the ISA free of CGT.
5. Sell money. Pounds sterling are also exempt from CGT so if you can manage to sell £10 for £15, not only will you be in the money, you will get to keep it all AND become a BitterWallet hero. Doesn’t work for foreign currency though, before you think about rushing off and fleecing foreigners though.