Chargeable Gain more than personal allowance

In the past few years I have made a small loss from the trading of my business. On my self assessment return I have opted to transfer part of my personal allowance to my husband (who pays standard rate tax on his income) thereby increasing his personal allowance. This year I have made a partial withdrawal from a UK based Capital Investment Bond. They have issued a chargeable gain certificate - the value is more than the standard personal allowance. If this is treated as my income (although it was not spent, just moved into an investment ISA with a better return) I will have to pay income tax on the value over the personal allowance. Can I set previous years trading losses against this ‘income’? Does the 26 years the CIB has been running have any effect? Thank you to anyone who has experience of this situation.

Hi,
 

The notional tax on a chargeable event certificate is calculated at the rate of 20%.  If your total income plus the gain from the chargeable event, means that you are only subject to tax at the rate of 20%, then the notional tax will cover this.  The length of time that the policy ran for can impact the tax liability, should some of the tax be payable at 40%.  The gains need to be declared on your self assessment tax return.  The self assessment supplementary page SA101 has a section for "Gains from life insurance policies, capital redemption policies and life annuity contract and accrued profits".  (Page Ai1 boxes 4 to 11). Thank you.

My income has been well under the personal allowance for many years. In 2021/22 my income was just over the £1000 allowance from Interest/dividends with no income from trading as I made a loss. If the chargeable gain is treated as income, will I have to pay 20% on the amount which exceeds my personal allowance? If so Can I set previous years trading losses against this?

Hi,

You set your personal allowances against capital gains. You have the annual exempt amount and then pay tax above this. Trading losses for self employment will be set against future self employment profit. If it is trading losses for shares, yes, you can use these but you have to notiy HMRCC of any losses within 4 year arising.

Thank you.