CGT planning for married couples

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{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e}.

John is retired and has relatively little income for 2018-19 and no capital gains. It is quite legitimate for Joy to gift 50{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} 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.

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