Christmas: a time to think about capital gains tax

Thinking of giving your children or grandchildren a nice family heirloom for Christmas? You might want to think again.

Let’s say you want to give a grandchild a nice painting, one that’s been hanging in your house for generations. If it is worth under £6,000, you can do so with no bother. But if it is worth more than £6,000 and has gone up in nominal value since its purchase (almost inevitable in a world of deliberate inflation), you will need to pay capital gains tax on that rise in value in exactly the same way you would have had to had you sold it to a stranger.

That’s not all. If you die within seven years, it could also be included as part of your estate for inheritance tax purposes. Then, says accountant Baker Tilly, more tax will be due. The same goes for any gifts to partners or girlfriends.

If you are married, you can give anything you like to each other tax-free, but hand a nice piece of inherited jewellery over to a partner you are not in an official partnership with and the tax hit is the same – capital gains is payable.

There’s more. Are you a non-dom? If so, you can give gifts to adult friends and children without any trouble. But if you hand anything over to a ‘relevant person’ it will count as remitting income or gains to the UK, and so be liable for either one of those taxes. Relevant people are spouses, co-habitees and any minor children or grandchildren.

It isn’t very Christmassy but there it is: there is almost no such thing as an untaxed transaction in the UK.

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4 Responses

  1. 19/12/2013, mr clyde wrote

    Whilst factually correct, this comment seems to send out the message that you should think twice about gifting chattels which I think is mistaken. Yes, gifting a chattel may create a chargeable capital gain and a PET for IHT purposes but it has to be done sometime and if there are CGT allowances to be used up, sooner is probably better than later. For larger disposals Deeds of Trust can be used to transfer shares in an object to any number of people in any proportion. You can even retain benefit from the gift (i.e. keep it) as long as a correct market ‘rent’ is agreed with HMRC. There are plenty of ways of creating untaxed transactions in the UK.

  2. 27/12/2013, Tyler Durden wrote

    Ahhh, dear Merryn. People hand over physical possessions all the time within family for no CGT or tax of any kind. That’s just the way it is, the way it has always been and the way it always will be.

    Can the ordinary person really be bothered with the time and expense of going through all of those rules? Most people have no idea about CGT.

  3. 29/12/2013, Tax slave wrote

    I’m inclined to agree with Tyler. CGT is regularly tweaked, against the tax payer, becoming increasingly complicated and unfair. It is basically now a tax on inflation; which is of course largely controlled by government. Whatever happened to period of ownership allowances, inflation allowances, fairness, allowance for aspiration and common sense? Little wonder that many people don’t understand or comply with the CGT circus.

  4. 19/01/2014, Tyler Durden wrote

    The only time I have ever seen CGT collected on generally was when people tried to sell Olympic torches on eBay. Since these were given to people for nothing it was easy for HMRC to work out what the profit was, since CGT is based on nominal profits.

    That’s why the Asian communities hand down their wealth in the form of gold mainly, and how they always seem to do well against inflation.

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