Capital Gains and any effect on the Starter Rate for Savings

Hi My brother and I have jointly inherited our late mother's house (nether of us lives there) and the offer we have accepted for the property is approximately 9% more than the value for probate meaning that we will be subject to Capital Gains Tax as the Capital Gain (for each of us individually - after deducting sales costs) will be in excess of the Annual Allowance of CGT. The completion date is not yet confirmed and could fall into next Tax Year, when I understand that the CG Allowance will be reduced to £3,000 each from the current £6,000 each. I have taken early retirement and I am not in receipt of a State Pension. My pension income is less than or only fractionally more than my income tax Personal Allowance. I have taxable savings interest well in excess of the £1,000 Savings Allowance and I will use the £5,000 Starter Rate for Savings as well as my Savings Allowance to 'cover' the savings interest, although I anticipate that I might have to pay BR tax on any excess of savings income (arising from saving my half of the net proceeds of the house sale) which takes my total income over the permitted £18,570 'tax free' amount (£12,570 plus £1,000 plus £5,000). Does my Capital Gain increase my 'income' for the purposes of calculating whether or not I am eligible for the Starter Rate for Savings as it will take my total income (combined pension and capital gain) above £17,570 meaning that I will only be entitled to the £1,000 Savings Allowance? The Capital Gain might be realised in the next tax year, but the effect on my savings interest income will not be different as my pensions are only due to rise by a few percentage points. Any guidance would be much appreciated. Thanks

Hi,

Any potential gain does not affect the starter rate for savings and you would still be due the £18750 tax free amount for 23/24.

Thank you

Thank you HMRC Admin 2, that's very helpful and a relief! Kind regards

HMRC Admin, can you please clarify how utilising the Starter Rate might affect the amount of the lower band charge available to set against a capital gain. e.g. Earned Income say £13000, Savings Interest £4250. Property Gain 40000. Obviously the excess of earned income over personal allowance would utilise £430 of the basic rate tax band but would any of the savings income utilise part of the basic rate band (even though there is no tax payable because of the Savings Allowance and Starter Rate?

Hi,

The starter rate band still falls within the basic rate band for this, but based on your figures, you still have the basic rate band to cover the taxable gain as the annual capital gain allowance would be deducted from the £40000 gain.

Thank you.