“Is the tax rate different if you have made a profit of R200 000 by selling your unit trusts compared to earning a salary of R200 000?” asks Wim.
Maya replies: Yes there is a significant difference between income tax and capital gains tax (CGT), with CGT much lower than personal income tax.
Remember, you would have invested in your unit trusts with after-tax money, so you would already have paid income tax on those savings and then you pay CGT on the growth.
Income tax vs CGT
If you earned R200 000 your marginal tax rate would be 25% and you would pay about R30 000 in tax (your average tax rate is lower, your marginal tax rate is the rate you pay on your highest rand earned).
If you received a capital gain from an investment you would pay CGT on 25% of that profit at a rate equal to your marginal tax rate. In other words 25% x 25% = 6%.
So if your gain was R200 000 you would pay R12 000 CGT compared with R30 000 of income tax.
Note that you do not pay CGT on the first R10 000 of gains, so your tax would be calculated on R190 000.
The highest level of capital gains tax you will pay is 10%, which is based on the maximum marginal tax rate of 40% (25% x 40% = 10%)
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