Sporting memorabilia has always been a passion of mine since a young age. I started collecting items at cricket matches, getting players’ autographs after the games. Over the years, my collection has grown significantly, with items acquired through various means such as personal collection, online auctions, and specialized sporting auctions.
As I plan to transition into retirement in the next 6-9 months, I am looking to generate income from my Isa portfolio and downsizing my memorabilia collection. I intend to sell these items through online sites and auction platforms. However, I am unsure about the tax implications of selling these items and whether they fall under income tax or capital gains tax (CGT).
According to Olivia Bowen, partner at Castlefield, profits from selling personal possessions are not subject to income tax. However, if the assets have increased in value, there may be a CGT liability. Items sold for £6,000 or more could be liable for tax, with the actual capital gains calculated based on the increase in value. Costs related to the sale, such as valuation or advertising fees, can be deducted from the gain.
The CGT rules apply when total taxable gains exceed the annual CGT allowance of £3,000 per person. The CGT rate is 24% for higher-rate taxpayers and 18% for basic rate taxpayers, increasing to 24% if income and gains exceed the basic rate tax band. Gifts to a spouse or civil partner can be made tax-free, allowing them to utilize their CGT allowance.
In a separate query regarding pension withdrawals, Claire Trott, divisional director at St. James’s Place, explains the implications of ‘Fixed Protection 2014’ on pension withdrawals. Under this scheme, a maximum of 25% of the pension value can be withdrawn tax-free. However, the overall lifetime allowance and lump sum allowance also play a role in determining the tax-free amount available.
The lifetime allowance, which was recently abolished, previously limited the tax-free amount that could be withdrawn from a pension. ‘Fixed Protection 14’ provides a maximum lump sum allowance of £375,000, with reductions based on previous withdrawals. It is essential to consider the overall pension situation and previous withdrawals to determine the tax implications of accessing the pension funds.
Overall, careful consideration of the tax implications is crucial when selling memorabilia or accessing pension funds to ensure compliance with HMRC regulations and optimize tax efficiency in retirement planning.