While gifting property to someone, you’ll need to pay the Capital Gains Tax(CGT) on gifts if the value of the property increases since you bought it. It’s like you sold your property for a benefit, then took that cash and gave it to someone as a gift instead. Gifting property to your loved ones is an excellent way to transfer your assets, and it can benefit your friends and family immediately.
While selling and disposing of your assets, you can’t get rid of CGT. So, read this blog till the end to know how you can avoid Capital Gains Tax on gifts and how you can avoid mistakes while gifting a property.
You can avoid Capital Gains Tax on gifts if:
- You have your own home and gift it to your child
- You gift your assets to your spouse or civil partner
- You gift your assets to a charity
Contact cheap accountants to know about the gifts on which CGT is charged..!
Avoid CGT by Gifting Property to Spouse or Civil Partner
You can gift property to your husband/wife/civil partner without paying a tax bill. This relief applies only on the event that:
- You are not divorced, separated, or dissolved in your relationship with your civil partner and are not living with your spouse at all in a tax year.
- You are not providing them gifts for business purposes.
Gifting property to your spouse can be a good choice on the condition that you are a higher rate taxpayer and your spouse is a low earner. This is because your partner will have to pay a lower tax rate if any CGT is due on the property. Similarly, on the off chance that your spouse later offers the house, then he might need to pay a charge on any gain he has made (the tax-free stipend for CGT is £12,300).
Gain = value of the home when you first bought – value of the home when your partner sold it
As a married couple, ensure that your property is in both (husband & wife) names. Because when it comes to selling, you can use both of your tax-free allowances (doubles to £24,600) with this.
Reduce your burden by allowing cheap accountants to calculate your Gains and losses!
Avoid CGT by Gifting your Main Home to Children
You can also avoid Capital Gains Tax on gifts by gifting your primary home to one of your offspring. This implies you can get private residence relief. The house needs to be your primary home to get this relief.
Keep in mind, by gifting a house to your offspring, you will no longer be the owner of that house and would have no rights to it. In addition to that, you’ll have to pay money (rent) to your offspring if you continue living there. However, rules are different for gifting a property that is not your primary home (second home), and you will be obliged to pay CGT tax on it.
Avoid CGT by Gifting Property to a Charity
Another way to avoid Capital Gains Tax on gifts is by gifting your assets to a charity on the following conditions:
- If you did not sell your property in an additional amount than the amount you paid for it
- If you did not sell your property for less than the market value
To calculate gain, you have to consider the amount that charity paid you instead of calculating the value of an asset.
Quick Sum Up
With the highlighted details, we hope you will understand how to avoid Capital Gains Tax on gifts better. The information provided is legal, and you can also apply to get the tax reliefs on CGT.
Claiming tax reliefs on CGT can be complicated if you encounter it for the first time or lack basic knowledge. We can help you in claiming tax reliefs with our qualified bookkeepers in London.
Need professionals for claiming tax reliefs on CGT? Let us claim your tax relief and submit it directly to HMRC on your behalf!