Capital Gains Tax allowance – use it or lose it!
Do you need to use your capital gains tax allowance before 6th April?
If you are making a lifetime gift, the tax that is most often a problem is capital gains tax (CGT). If you make a gift to someone of a house, or some shares or a valuable personal possession, you are treated for CGT as though you have sold it for its full market value. This is a surprise to many people, and a key reason you need to take tax advice before making a gift.
One way to lessen or eliminate a CGT bill is to arrange the gift so that the gain realised is less than your annual allowance for CGT, currently £12,300. A married couple can arrange things so that each gives a gift of a share of the thing being given away, so that each only realises a gain of less than £12,300, so they can realise a gain of up to £24,600 on making the gift without any CGT being payable. The Chancellor has decided this allowance is much too generous, so the annual allowance goes down in the next tax year (23/24) to £6000 each, and then in the following year to £3000 each.
If you make a gift of cash, capital gains tax is not an issue, but if you are thinking of making a gift of a share of a house, or quoted shares or a valuable personal possession, and you want to use your (generous!) allowance for the current year, you need to act now, to take advice and get the gift completed before the end of 5th April.
Thomas Woodlee is a solicitor in the private client team at Barker Gotelee, Solicitors in Ipswich.