There are a number of Allowances that may apply to you; Capital allowances, Marriage allowance, Child Care Account - Clayton CCA will guide to to the relevant sections that apply to your circumstances. Here we talk about one example in detail:
Gifts between spouses
For example, married couples (or civil partners) can achieve capital gains tax (CGT) savings by making gifts between themselves, particularly in unfortunate circumstances where the life expectancy of one spouse is shorter than the other.
The gift of a valuable asset (e.g. shares in an investment company) between connected persons is normally treated as a disposal at market value for CGT purposes (TCGA 1992, s 18). However, gifts between spouses living together are generally treated as made on a ‘no gain, no loss’ basis (s 58(1)). On death, a deceased individual’s assets are deemed to be acquired by his or her personal representatives at market value. When an estate asset passes from the personal representatives to a beneficiary, no chargeable gain arises; in effect, there is generally a potential CGT-free uplift in the value of the asset on death (s 62). These provisions can have beneficial results.
Example: Gift of investment properties
John and Karen are married, and domiciled in the UK. Unfortunately, Karen has recently been diagnosed with a terminal illness, and her life expectancy is less than a year. John owns several investment properties in London, which are standing at a significant capital gain. He transferred the properties to Karen. Under the terms of her will (prepared some years previously), Karen’s estate passes on death to John. Sadly, Karen died eight months later, leaving her entire estate (including the properties) to John.
The transfer of the investment properties from Karen to John was free of CGT. John receives the properties back on Karen’s death, uplifted to market value. John might consider selling the properties shortly afterwards, with little or no CGT to pay.
Whilst this article only considers the CGT position, it should be noted that there is an Inheritance Tax exemption for transfers (i.e. lifetime and on death) between spouses (or civil partners). In the above example, John’s investment properties were gifted to Karen, and Karen’s estate (including the properties) passed to John, without an Inheritance Tax charge on each occasion.
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