Are We Better Off? - CGT Question

Bitstring , from the wonderful person Steve said

You don't generate a CGT bill on transfer between spouses, so that won't work. Best plan would be to go live in it before selling it, but that may not be feasible I guess.

GSV,

I spotted this in the Sunday Times:

GSV,

I spotted this in the Sunday Times, the 6th paragraph seems to contradict your first point:

Investors with assets purchased before 1998 benefit from indexation allowance, which was brought in to take account of high inflation.

Someone who bought an investment in the summer of 1982 could knock an extra

105% off the gain they have made. Suppose he or she bought the assets for 50,000 in 1982 and sold them today for 200,000. The first 102,000 of profits would be tax free, reducing the taxable gain from 150,000 to 98,000.

Because of taper relief, a higher-rate taxpayer would pay 24% on the 98,000 gain, or 23,520 if he or she sold before April 5, ignoring annual allowances.

But the tax bill would jump to 27,000 if the sale took place after that date as indexation and taper relief are removed and replaced by a flat 18% tax rate on the full 150,000 gain.

Jason Butler at Bloomsbury Financial Planning said: "Investors who have most to lose are those with relatively small gains, including investors in Japan, stock-market dogs such as Rentokil and owners of farmland."

You don't have to lose out, though. You can pass your assets tax free to your spouse to lock in the benefit of indexation.

In the above example, as long as the transfer took place before April 5, the value of the shares when the spouse received them would be 50,000 plus the indexation allowance - in other words, they would be assumed to have acquired the assets for 102,000.

If the couple then sold their shares for 200,000 in May, their gain would be 98,000. He or she would pay tax on this profit at the new 18% rate - a bill of 17,640 against 27,000 if the couple did nothing.

Mike Warburton at Grant Thornton, an accountant, said: "All married couples who benefit from indexation allowance should consider it, as in many cases they will be substantially better off

Steve

Bitstring , from the wonderful person Steve said

Hmm, I didn't think it worked that way, but I bow to the superior knowledge of the Sunday times - maybe the rules are different in this unique case.. When I have transferred assets to my spouse in the past they were treated as having been acquired, by her, at the same price I acquired them, and all gains made were hers.

It is a land registry form of some description. You will also have to pay stamp duty.

Do you have to pay stamp duty on a gift?

I'd suggest the OP asks in uk.legal.moderated for what the minimum they need to do. I think they'll need a deed of trust but there may be no need to change the land registry information, especially if they transfer 99% rather than 100% and become tenants in common. (I'm guessing that you might be obliged to update the land registry information if you are the only listed person and you have no interest in the property but you definitely don't have to update it if you give away a share of the property)

Tim.

Tim.

Surely stamp duty is only payable if the transfer is by sale, and not if it is a gift.

The above text contains inaccuracies. The journalist is sloppy and deserves to be told to shape up or ship out.

"Knock an extra 105% off the gain" should read "knock an extra 105% *of the original acquisition cost* off the gain". In the example, if the assets were bought for £50k before April 1982, indexation allowance knocks £52,350 off the gain.

"Profits" should read "proceeds". Obviously if you buy for £50k and sell for £200k, the "profit" (more correctly the actual gain) is £150k. The first £52k of this "profit" would be tax free, which means that together with the £50k acquisition cost the taxable "profit" (taxable gain) is reduced to £98k.

Journalists are well known for not understanding the difference between turnover and profit.