The Capital Gains Tax (CGT) implications of gifting an unencumbered asset to your loved ones should always be considered prior to making a gift. If the asset you are thinking about giving away is worth more than what you purchased it for, you may have to pay CGT on its increase in value without receiving any proceeds. Also, the recipient of the gift may have to pay Inheritance Tax (IHT) if you do not survive seven years from the date the gift is made – a double tax charge; most unwelcome.
If you own a portfolio of quoted shares which have fallen in value over the last few months (and might even be worth less than you paid for them at the moment), now could be a good time to reconsider your lifetime gifts to…
- minimise (or potentially avoid) the CGT payable on the gift;
- fix the value of the gift at the date the gift is made which, if sadly you didn’t survive the seven years, would be included in your Estate for IHT purposes; and
- ensure the future growth in value of the shares gifted is not included in your Estate for IHT purposes.
HMRC’s latest monthly tax receipts bulletin which was published on 23 June 2022 showed that IHT receipts for April 2022 to May 2022 alone were £1.1bn. Knowing that the IHT tax free thresholds of £325,000 (the nil rate band) and £175,000 (the residence nil rate band) are to be maintained at these levels until April 2026, IHT receipts will probably increase further.
In theory, qualifying Estates of a surviving spouse (or surviving civil partner) valued at no more than £1m could pass, free of IHT, to direct descendants. Not surprisingly, no date has been set for the Autumn Budget later this year and at present, we don’t know what changes, if any, will be made to IHT so now is probably a good time for families to think about their Estate and IHT planning.
Contact CKLG on 01223 810100 to discuss Estate planning, your potential liability to IHT and how to make best use of the current available IHT reliefs and allowances during your lifetime – while they are still with us.
