Ignoring Nicola tax in Scotland, in most of the UK you pay tax at 20% up to the limit of the basis rate band, and at 40% above that.
Your chargeable gains are considered as if they were your top slice of income and the rate of tax is determined from that.
Pretend that the basic rate band is £30000. All the figures that follow are net of allowances and reliefs.
Scenario A: Income £20,000, gains £10,000. Income will be taxed at 20% and the gains taxed at 18%
Scenario B: Income 40,000, gains £10,000. £30,000 income will be taxed at 20% and 10,000 at 40%. The gain of £10,000 is taxed at 28%
Scenario C: Income £10,000, gains £40,000. £10,000 income taxed at 20%. £20,000 gain taxed at 18%, and £10,000 taxed at 28%.
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