utilising CGT allowance

[ookook]

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?

[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.

[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)

[ookook]

how does paying into a pension affect my CGT allowance?

[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.

[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.

[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).

[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.

[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...

[Pickle2]

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

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