Capital Gains Tax (CGT) applies when you dispose of an asset that has increased in value since you acquired it. This includes selling, transferring, exchanging, or gifting the asset. When you gift an asset (e.g., shares, property, or other investments) to someone who isn’t your spouse or civil partner, the transaction is treated as though you’ve sold the asset at its market value. If the asset has increased in value, CGT might be payable on the gain, even though no money changes hands. Gifts between spouses or civil partners are generally exempt from CGT. The recipient takes over the original cost basis of the asset. Gifts to anyone else are treated as if sold at market value, meaning CGT may apply. Certain assets are exempt from CGT, such as: - Your primary residence (subject to certain conditions). - Personal belongings (chattels) worth less than £3,000. - ISAs or other tax-exempt accounts. Each individual has an annual CGT allowance (currently £3,000 for 2024/25). Gains within this amount are tax-free. The applicable CGT rate depends on your income tax band (basic rate or higher/additional rate). Basic rate taxpayers pay 18% and higher/additional rate taxpayers pay 24%. You can calculate the CGT on a Gift by: 1. Determining the Market Value: Use the asset’s current market value at the time of the gift. 2. Calculate the Gain: Subtract the original purchase price (plus allowable costs) from the market value. 3. Apply Exemptions: Deduct the annual CGT allowance or any other applicable reliefs. 4. Tax the Remaining Gain: Apply the appropriate CGT rate to the taxable portion of the gain. There are reliefs to minimise CGT: - Holdover Relief: Available for gifts of certain business assets, allowing the CGT to be deferred until the recipient disposes of the asset. - Private Residence Relief: For your main home, if eligible. Important Notes: - Gifts to charities are exempt from CGT. - For non-cash gifts, proper valuation of the asset is crucial. - If you’re gifting to avoid CGT on a future sale, remember the recipient may incur CGT when they dispose of the asset. I hope that helps. Please note this is information, not advice.
If you have a flexible share porfolio purchased for £10K that is now worth £20K, can you now sell a proprtion equal to £10K (the original purchase price) now without any CGT issue?. All the remainder would a capital gain (when cashed in) and provided it was drawn out at £3K or less each year would it be free of CGT?
You may be able to sell half your share portfolio, equating to your original £10k investment, without triggering Capital Gains Tax (CGT). This is because you'd essentially be recovering your original investment so there's no gain to be taxed. The remaining £10k would then represent a capital gain. When you sell portions of this, you'll need to consider CGT. Your plan to draw out £3k or less each year is a good start. This amount falls within the current annual CGT exemption. However, it's important to note: Cumulative Gains: While each individual withdrawal might be below the exemption, the total gain from the entire £10k portion will eventually exceed the exemption. Tax Years: You need to consider CGT on an annual basis. If you withdraw more than £3,000 in a single tax year, you'll pay CGT on the excess. Additional Considerations: Bed and Breakfasting: Selling and repurchasing the same asset quickly (usually within 30 days) can be considered 'bed and breakfasting' and may affect CGT calculations. Tax Rates: CGT rates vary depending on your income and the total gain, and are subject to change. In any case, it's crucial to keep detailed records of your purchases, sales, and valuations. This will help you accurately calculate any CGT liability when you file your tax return. For precise advice tailored to your circumstances, consider consulting an accountant. They can provide expert guidance on CGT implications and help you optimise your investment strategy. I hope this helps! Please note this is not financial advice.
Hello, can you explained the (cgt) regarding gifting a sum of gains,
? Thank you.
Capital Gains Tax (CGT) applies when you dispose of an asset that has increased in value since you acquired it. This includes selling, transferring, exchanging, or gifting the asset.
When you gift an asset (e.g., shares, property, or other investments) to someone who isn’t your spouse or civil partner, the transaction is treated as though you’ve sold the asset at its market value. If the asset has increased in value, CGT might be payable on the gain, even though no money changes hands.
Gifts between spouses or civil partners are generally exempt from CGT. The recipient takes over the original cost basis of the asset. Gifts to anyone else are treated as if sold at market value, meaning CGT may apply.
Certain assets are exempt from CGT, such as:
- Your primary residence (subject to certain conditions).
- Personal belongings (chattels) worth less than £3,000.
- ISAs or other tax-exempt accounts.
Each individual has an annual CGT allowance (currently £3,000 for 2024/25). Gains within this amount are tax-free.
The applicable CGT rate depends on your income tax band (basic rate or higher/additional rate). Basic rate taxpayers pay 18% and higher/additional rate taxpayers pay 24%.
You can calculate the CGT on a Gift by:
1. Determining the Market Value: Use the asset’s current market value at the time of the gift.
2. Calculate the Gain: Subtract the original purchase price (plus allowable costs) from the market value.
3. Apply Exemptions: Deduct the annual CGT allowance or any other applicable reliefs.
4. Tax the Remaining Gain: Apply the appropriate CGT rate to the taxable portion of the gain.
There are reliefs to minimise CGT:
- Holdover Relief: Available for gifts of certain business assets, allowing the CGT to be deferred until the recipient disposes of the asset.
- Private Residence Relief: For your main home, if eligible.
Important Notes:
- Gifts to charities are exempt from CGT.
- For non-cash gifts, proper valuation of the asset is crucial.
- If you’re gifting to avoid CGT on a future sale, remember the recipient may incur CGT when they dispose of the asset.
I hope that helps. Please note this is information, not advice.
Well explained and concise!
Thanks for watching!
If you have a flexible share porfolio purchased for £10K that is now worth £20K, can you now sell a proprtion equal to £10K (the original purchase price) now without any CGT issue?. All the remainder would a capital gain (when cashed in) and provided it was drawn out at £3K or less each year would it be free of CGT?
You may be able to sell half your share portfolio, equating to your original £10k investment, without triggering Capital Gains Tax (CGT). This is because you'd essentially be recovering your original investment so there's no gain to be taxed. The remaining £10k would then represent a capital gain. When you sell portions of this, you'll need to consider CGT.
Your plan to draw out £3k or less each year is a good start. This amount falls within the current annual CGT exemption. However, it's important to note:
Cumulative Gains: While each individual withdrawal might be below the exemption, the total gain from the entire £10k portion will eventually exceed the exemption.
Tax Years: You need to consider CGT on an annual basis. If you withdraw more than £3,000 in a single tax year, you'll pay CGT on the excess.
Additional Considerations:
Bed and Breakfasting: Selling and repurchasing the same asset quickly (usually within 30 days) can be considered 'bed and breakfasting' and may affect CGT calculations.
Tax Rates: CGT rates vary depending on your income and the total gain, and are subject to change.
In any case, it's crucial to keep detailed records of your purchases, sales, and valuations. This will help you accurately calculate any CGT liability when you file your tax return.
For precise advice tailored to your circumstances, consider consulting an accountant. They can provide expert guidance on CGT implications and help you optimise your investment strategy.
I hope this helps! Please note this is not financial advice.