This article is also relevant to couples who have entered into a civil partnership.
For the tax year 2018-19, taxpayers can make tax-free capital gains of up to £11,700.
This allowance is available on a per person basis and so married couples (and those in a civil partnership) have a combined CGT allowance of £23,400.
Consider married couple John and Joy. Joy wants to dispose of a block of shares before 6 April 2019, but this will create a taxable gain of £22,000. After her CGT allowance is deducted this will create a CGT bill of £2,060 – Joy is a higher rate taxpayer and so she would pay CGT at 20%.
John is retired and has relatively little income for 2018-19 and no capital gains. It is quite legitimate for Joy to gift 50% of her shares to John before they are sold – gifts between spouses and civil partners are free of CGT. Each party would then sell their half-shares and chargeable gains of £11,000 each would be covered by their £11,700 allowance. Hey presto, no CGT to pay.
John and Joy decide to use the tax saved to fund a well earned winter break abroad. Not a bad outcome and an entirely acceptable tax planning ploy.
If you would like to discuss this article in more depth please contact us on 01423 560547 (Harrogate), 0113 243 3559 (Leeds), 01756 691065 (Skipton).