Tax - Capital Gains queries

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Q. I've got a few questions that I've been puzzling over for some time now and I'd greatly appreciate any help or advice to them. Firstly, I've been reading up on capital gains tax. While I understand its principle, I don't understand the rate which it is charged at. What I'm getting at is this, capital gains tax is charged at the gain of your capital on your income tax level. So, someone who holds £100,000 of shares on the stock exchange, and has an annual income of £5000 from dividend payments, and is charged at the 23% income tax rate. Given this situation, what rate of capital gains tax will apply to his assets upon sale? 23% or 40% ? Expanding on this situation, the person sells £25,000 of his/her capital to cover living expenses. Is this £25,000 considered income? I would've thought not? Second question, when it comes to working out capital gains tax on your investment, does one take into account stamp duty and broker's commission fees? Eg: If you buy £10,000 worth of shares in BT, but it costs you £11,000 to buy them due to broker's fees and stamp duty, does the taxman use the £11,000 figure or the £10,000 figure? Many thanks in advance to anyone who can help me,

A. >I've got a few questions that I've been puzzling over for some time now and >I'd greatly appreciate any help or advice to them. I'm sure there are far more knowledgeable than me but I'll have a go! >So, someone who holds £100,000 of shares on the stock exchange, and has an >annual income of £5000 from dividend payments, and is charged at the 23% >income tax rate. Given this situation, what rate of capital gains tax will >apply to his assets upon sale? 23% or 40% ? I think the way it works is that if the capital gain in any tax year exceeds the exempted amount (£6,500 I think this year) then it is in effect treated as income, so your existing income tax rate applies. A large enough gain would take you up into the 40% bracket just like a large bonus on your salary. >Expanding on this situation, the person sells £25,000 of his/her capital to >cover living expenses. Is this £25,000 considered income? I would've thought >not? If the thing which you are selling for £25,000 cost you less than that to acquire, then you are making a gain. If not, then you're not. Tax is only levyable on the gain. >Second question, when it comes to working out capital gains tax on your >investment, does one take into account stamp duty and broker's commission >fees? I believe it is the total amount you got back, less fees in selling, less the total amount you paid to acquire. >Many thanks in advance to anyone who can help me, No problem. However I suggest you go to the Inland Revenue web site, find the section on Self Assessement, and look for the leaflets IR284, IR285 and IR287. I can't point you at the exact URL since www.open.gov.uk appears to be down right now.

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