Pay Capital Gains Tax or transfer shares?

Snowdrop2023

I have shares worth about £37 000 which were gifted to me in 2010. They were originally 50p a share and are now 1698p. They were to be used for the upkeep of a shared family property. They currently pay a dividend of £1950 (in the last year). Is there anything I can do to reduce the Capital Gains Tax payment? I have been told that the allowance will decrease significantly starting from April. Also, does the Capital Gains Tax apply to the increase in share price since they were gifted to me or to the increase in share price + dividends paid out? Would gifting them to siblings be sensible?

Linton

Capital Gains tax applies to the increase in value of the shares between when you received them and when you sell them. However if the gifts are received from or  given to "connected persons" (eg a close relative) the rules are different.  Others should be able to expain.

Dividends are taxed under Income Tax. There is a dividend allowance of £2K so hopefully you are not receiving dividends from any other investments.

Snowdrop2023

Thanks for your help.

TBC15

Linton said:

Capital Gains tax applies to the increase in value of the shares between when you received them and when you sell them. However if the gifts are received from or  given to "connected persons" (eg a close relative) the rules are different.  Others should be able to expain.

Dividends are taxed under Income Tax. There is a dividend allowance of £2K so hopefully you are not receiving dividends from any other investments.

Sounds like an easy way around CGT. Gift them to a friend they cash them in with minimal CGT to pay. You get the cash back sometime in the future. If it was this easy why isn’t everyone doing it?

InvesterJones

Each year you could sell enough to keep CGT under allowances, though note that the dividend allowance is also halving so it's likely you'll have to pay some tax on that in the future, however rates for both CGT and Dividend are still somewhat less than say income from salary/savings (as to which is lesser of CGT or Dividend tax, depends on your tax band I think). Begins to get complicated so I'd recommend posting on the tax boards!

HappyHarry

TBC15 said:

Linton said:

Capital Gains tax applies to the increase in value of the shares between when you received them and when you sell them. However if the gifts are received from or  given to "connected persons" (eg a close relative) the rules are different.  Others should be able to expain.

Dividends are taxed under Income Tax. There is a dividend allowance of £2K so hopefully you are not receiving dividends from any other investments.

Sounds like an easy way around CGT. Gift them to a friend they cash them in with minimal CGT to pay. You get the cash back sometime in the future. If it was this easy why isn’t everyone doing it?

That plan does not work the way you might think.

If you gift them to a friend, then you will be liable for CGT based on your acquisition cost and on the value of the shares when you make the gift.

A "connected person" mentioned above would be a close relative, where the rules are different. 

Reaper

It's a bit late now but what you should have been doing is to gradually move them over to a stocks & shares ISA, then you would never have to pay Capital Gains Tax. You could still do that now, selling just enough to use up your capital gains allowance each year. Sadly that allowance is being slashed so you will be severely limited how much your can transfer going forwards.

Snowdrop2023

How do you transfer shares into a Stocks and Shares ISA? 

eskbanker

Snowdrop2023 said:

How do you transfer shares into a Stocks and Shares ISA? 

Unless they're from a maturing sharesave scheme, you don't, or at least not in one step - you sell them, transfer the proceeds into the ISA and then repurchase once in there, although some platforms will package these three activities together and label them 'Bed & ISA'.

Linton

Snowdrop2023 said:

How do you transfer shares into a Stocks and Shares ISA? 

Except for certain employer  sharesave schemes you cannot transfer shares into an ISA.  You have to sell outside the ISA and buy back inside, a process known as bed-and-ISA.

jimjames

Snowdrop2023 said:

I have shares worth about £37 000 which were gifted to me in 2010. They were originally 50p a share and are now 1698p. They were to be used for the upkeep of a shared family property. They currently pay a dividend of £1950 (in the last year). Is there anything I can do to reduce the Capital Gains Tax payment? I 

The way to reduce it is to use your annual allowances as much as you can. So make the most of the just over £12000 this year, £6000 and £3000 following years. That will take care of over £19000 of the gains. Only sell enough to use the limit though if you want to reduce what CGT you pay.