Reply to: utilising CGT allowance

[TheFaQQer]

Well let me know if you find an answer as I'm in exactly the same position and now taper relief has gone so has my way of getting the 30k out of the company, will also be speaking to the accountant about this will let you know if he comes up with anything sensible and legal.

I've you've got the money there now, then you are probably best off shutting down before April anyway, to make sure that you get one more hit at taper relief before it goes.

Depends on how long you've had the company though.

[shelby68]

yes i was planning to take up to the higher rate tax bracket - but you've missed the point.

If i take out up to the higher tax bracket every year I'll still be left with 20-30k sloshing around in the company account.

My question was more about how to get that extra cash out without incurring extra tax - using the 9k annual CGT allowance

Well let me know if you find an answer as I'm in exactly the same position and now taper relief has gone so has my way of getting the 30k out of the company, will also be speaking to the accountant about this will let you know if he comes up with anything sensible and legal.

[ookook]

yes i was planning to take up to the higher rate tax bracket - but you've missed the point.

If i take out up to the higher tax bracket every year I'll still be left with 20-30k sloshing around in the company account.

My question was more about how to get that extra cash out without incurring extra tax - using the 9k annual CGT allowance

[thompsonson]

I was wondering how other contractors best use their CGT allowance.

Assuming the following:

myco earns 100k - i have 10k expense pa - pay myself 6k salary

Careful with the 6K salary as this is lower than minimum wage and (i believe) illegal... (I'm not an account though...)

so i have my 84k profit - CT takes 20% - leaving me 67K odd

I take up to my higher tax rate in dividends - I have no income shifters

I was previously planning on leaving the 30K odd that I dont withdraw in the company account for 3 years then drawing it out using taper relief.

Now that this option is gone - any ideas on how to use my annual CGT allowance to get more of the money out without attracting excess tax?

I'm in a similar situation and intend on using the brackets to there full. As i understand it you don't pay tax on divi if you are in the basic tax bracket, so I'm drip feeding my divi out of the company at about 2k/month - with basic wage i think that's a fair take home.

[Crossroads]

I've just put the same question to my accountant (Quay).

Slightly different scenario as the reason for my buy back would be to remove or reduce the share ownership of two shareholders (not me), both of whom no longer have reason to be shareholders, either in the "proper" sense or from a tax efficiency point of view.

[Pickle2]

Pickle posted a similar thing yesterday or the day before. Let us know how you get on Monkey, also would be good to get some feedback from the Accountants on the board...

Ruprect, how about rather than the company buying back the shares, instead, I buy some of your shares in your ltd and you buy some of my shares in my ltd. And then we just waive our rights to dividends in each others company when the divis are declared.

We could sell each other 1 share each year for 9k and use up our capital gain allowance.

Hoorah, with the extra tax we wont pay thats a few dirty hospital beds that will have to go. Everyone wins.

[Pickle2]

I raised this also a long time ago, big thread on it from then.

http://forums.contractoruk.com/accou...-buy-back.html

[Ruprect]

Pickle posted a similar thing yesterday or the day before. Let us know how you get on Monkey, also would be good to get some feedback from the Accountants on the board...

[XLMonkey]

Buy back some of the shares that you own in the company. Am just in the process of consulting my account on this point, but I think that this would work quite well now that the capital gains tax rate has been "normalised" to 18%.

- You own, say, 100 shares in yourco.
- Yourco buys 10 shares back from you, at 921 GBP each.
You declare the capital gain (original value was 1 GBP, capital gain is 920/share) on your tax return. No tax to pay
- Any extra (over and above your CGT allowance), you would pay 18% on, which is better than the 22.5% equivalent you pay on higher rate dividend income.

The health warning on this is that I am still checking with my accountant (and would welcome views from the accountants who post on this board). But on first inspection it looks like a viable alternative.

[backlight]

Leave the country, move to a tax haven, wait until you are no longer a resident for tax purposes (not sure how long this needs to be – I have heard different things from different sources), and then take the funds out of the company as a dividend. No tax! (less the CT already paid that is).

[hugebrain]

I was wondering how other contractors best use their CGT allowance.

Assuming the following:

myco earns 100k - i have 10k expense pa - pay myself 6k salary

so i have my 84k profit - CT takes 20% - leaving me 67K odd

I take up to my higher tax rate in dividends - I have no income shifters

I was previously planning on leaving the 30K odd that I dont withdraw in the company account for 3 years then drawing it out using taper relief.

Now that this option is gone - any ideas on how to use my annual CGT allowance to get more of the money out without attracting excess tax?

Use your excess money to invest in a buy-to-let property. After twelve months, throw your hapless tenants into the street and sell the house for a nifty capital gain. Rinse and repeat.

[TheFaQQer]

how does paying into a pension affect my CGT allowance?

Sorry - it doesn't. I only read the line "get more of the money out without attracting excess tax?" at the end as I was skimming the gist (wrongly, as it turned out!)

Can't think of way of getting money out without incurring more tax.

[ookook]

how does paying into a pension affect my CGT allowance?

[Hiram King Of Tyre]

Pay it into a pension? Doesn't help short-term, but it would in the long-term.

That's what I do too...I'm 48 now and will be able to draw out 25% tax free when I'm 50 (before the rules change)

[TheFaQQer]

I was wondering how other contractors best use their CGT allowance.

Assuming the following:

myco earns 100k - i have 10k expense pa - pay myself 6k salary

so i have my 84k profit - CT takes 20% - leaving me 67K odd

I take up to my higher tax rate in dividends - I have no income shifters

I was previously planning on leaving the 30K odd that I dont withdraw in the company account for 3 years then drawing it out using taper relief.

Now that this option is gone - any ideas on how to use my annual CGT allowance to get more of the money out without attracting excess tax?

Pay it into a pension? Doesn't help short-term, but it would in the long-term.