Mortgage Management and Investment Strategies

This week we answer questions on the loose theme of capital gains tax and investing via General Investment Accounts (GIAs). Spoiler alert - nothing’s as simple as it might seem!

Shownotes: https://meaningfulmoney.tv/QA11 

01:06  Question 1

Whenever a question comes up in our Facebook group about Capital Gains and GIAs (General Investment Accounts) I get a sinking feeling as I do not know much about that type of account, and I don’t have one myself.  I am not alone. I have gathered questions from our listeners about capital gains, so in this episode Pete & Roger can tell us all about Capital Gains, Dividends, and anything else we need to know about using a GIA, and other situations which involve capital gains tax.

19:03  Question 2

Hi both, I've recently discovered your podcast and have thoroughly enjoyed my commutes listening to you. Personable and informative.

I have a question about selling my buy-to-let property that is in my personal name. My mortgage term is ending in June 2026 and I'd like to sell it for one of better quality that has less issues. I'm currently a higher-rate taxpayer but we're planning to start a family in the next year, meaning I'll be on maternity leave for 12 months which will push my salary down to basic-rate. Impossible to plan when I'll get pregnant but it would be useful to know how HMRC calculates my salary (and over what time period) so that I pay basic-rate CGT when selling my buy-to-let?

Apologies for a very wordy question! Thanks a lot and best wishes, Winnie

22:17  Question 3

Hi Pete,

I hope you're doing well! I’ve been really enjoying the Meaningful Money podcast and had a question I’d love to hear your thoughts on the show:

In a general investment account (GIA), is it's better to use an income fund to avoid triggering CGT if income is needed (assuming the dividends covers the needs in the short term)?

Thanks so much for your wisdom! And keep up the great work on the podcast! :) Best regards, Chloe

26:53  Question 4

Hi Pete, Roger (and Nick who I assume is reading this :-))

I have a question I'd be grateful if you could answer which is around capital gains tax on any shares or funds held outside an ISA/pension.

To use an example with higher numbers so that the allowance is used for simplicity:

- You have £100k in a GIA - it increases by £10k a year for the first two years; - it's then down £2k in the third - the total value is now £118k - You then want to draw out £10k - How do you work out what capital gains the tax is to be paid on i.e. is the full £10k considered a gain? - Is the withdrawal from the original £100k or from the increase in value i.e. gain? - Would you be better to withdraw up the annual allowance every year and then put it back in to reduce the gain, considering there's no allowance for the impact of inflation?

Love the show, keep up the good work in whatever format you decide going forwards - you've made real differences to the way I've managed my investments over the years, especially at scary times like Covid and your book and courses have given my kids the education they need for their long investing lives.

Thanks, Dino

36:39  Question 5

Hi Pete & Rodger,

I started a deep dive into our overall finances over the Christmas period, to set the picture I am 47, my wife’s 42 and we have two children a boy 5 & a girl 3.

I received a diagnosis last year which will have a long term impact on my ability to sustain my current level of income & type of work I do. We have a 154k mortgage with 19 years left on the term, with the uncertainty around my health I have decided to target maximum overpayments on the mortgage, this year we can pay 18k extra.

My questions are: 1. I plan to save circa 1k per month salary to put into the overpayment pot, I am hopeful that the HL shares will meet past highs and I can use some of that money to top up the salary savings and hit our target. Do I pay tax on the profit I make from selling shares? If it’s no more than 3k? I was hopeful I could sell shares annually and withdraw the gains annually, then reinvest in same stock when they dip. I realise that past performance isn’t always guaranteed but monitoring since covid the stocks I am invested in are fluctuating from a £15 low to £20 high annually. So looking to sell at £19.5. Is this the best way to use the extra cash at present given the plan to access quickly at times. I have maxed out isa allowance for current FY (2024/25) but will probably pay the 1k per month into an isa in new FY.

2. I am planning to do lump sum overpayment rather than setup monthly, just to give easy access to funds should they be required. I plan to cash in some company SIPPS annually when they aren’t taxable (after 5 years) that sum will be on average 1k per year. Will the SIPPS cashed in and gains from HL sales leave me vulnerable to paying capital gains tax?

If all goes to plan we could be mortgage free by 2033 approximately and there would be less of a dependency on my salary. Deep down I just want us to be setup financially as best we can with the uncertainty around my health. I would really appreciate your views, love the podcast and it’s been a real source of knowledge to me. Best Regards Lee

43:52  Question 6

Hi Pete & Roger,

I found your YouTube channel last year and through that the Podcast – both are absolutely fantastic and have helped me and my family so much with many aspects of managing our money and planning our finances.

My question relates to if and to what extent capital gains tax can be offset by making SIPP contributions.

My wife and I jointly own a buy to let property that we are selling in the new financial year (25/26).  When the sale completes, we expect to each have a taxable capital gain of around £30,000.  My wife earns around £10k a year from a part time job, therefore most of her gain will be taxable at the lower rate of 18%.  For the last couple of years, she has made annual gross SIPP contributions 100% of her earnings (£10,000) which is the maximum gross contribution she can receive basic rate tax relief on.

This year, as well as contributing the usual £10,000 gross, (100% of earned income), can she also contribute up to a further £30,000 gross and receive basic rate tax relief on this additional contribution, thus offsetting the CGT paid on the gain from the property sale?  If so, with CGT payable at 18% and basic rate tax relief of 20%, contributing the full £30,000 would actually more than offset the CGT (which I fear is too good to be true).

If this is the case, is there any other strategy we should be considering to achieve the same or similar outcome?  I have really struggled to find definitive guidance around this, so any clarity you can provide will be much appreciated.

Many thanks and keep up the great work. Steve