How to correctly gift shares to spouse, CGT changes

scoobyjones1

housebuyer143 said:

I understand why people want to avoid tax and of course i do to, but when you think about it why should money you made out of nothing be tax free? Why is this expected? 

It's richer people who just get richer by having these allowances as the poorer end of society will not have enough money to exceed them by investing in shares and earning over the tax free savings threshold.
As a matter of fairness paying tax on profits does seem just in my opinion, however upsetting it maybe. 

Your points are all valid, housebuyer but sometimes money is not made out of nothing. It's hard work, already taxed and invested with retirement in mind....especially with people like me who were expecting a pension at 65 (women were told 60) and then being left high and dry until 68... now some 70...who knows where it will end! I am far from rich, maybe more fortunate than some but I have worked very hard, sometimes multiple jobs, for 45 years so far. I am just trying to maximise that within the rules... but the rules have changed, very suddenly.

With a £3000 threshold on Capital gains this will be an issue for a lot of people. Any things you sell for a profit, added up through the year will be liable to scrutiny, self assessment forms and if over £3000.... tax!...it might be things on Ebay, or say a car boot sale, through the small ads... gains from an inheritance, a car, a watch, anything. This is now a big issue in the US where Ebay, Paypal and the like take tax from you and you have to fill in forms to reclaim it. I predict this will happen here. We are not talking about millionaires here...just average people. Best wishes. 

eskbanker

scoobyjones1 said:
I will be fine anyway thanks to helpful advice from kind people on here like Reed and UncleK . What is NOT helpful is to have constant arguments and patronising comments from the likes of you. I KNOW what I could have done. I was looking for a work around from here.

Not trying to get the last word in as such but just feel obliged to respond to that....

To me this thread effectively had two separate phases - the first one where you were asking how to handle a gift to your spouse, to which I gave the correct answer on the first page, which you thanked me for.

However, after that exchange about the practicalities of what you need to do, you then decided to have a bit of a rant about the CGT allowance changes and some of the more contentious comments unsurprisingly triggered some wider debate.

Malthusian

scoobyjones1 said:

How does "saving twice as much" account for inflation? Unless you can find a savings interest rate above inflation...which I haven't seen? 

If:

• you want to have £100,000 in 20 years' time, in today's money
• and investments hold their value against inflation (never guaranteed, but a more than reasonable assumption for a 20 year investment)
• and cash loses value at 3%pa (depends on how assiduous you are at switching accounts, but cash generally returned minus 2-3% in real terms in the zero interest rate environment, which plummeted to minus 5%pa in the recent era of 5% interest and 10% inflation)

Then today you would need £100,000 invested in investments or £200,000 saved in cash. Roughly speaking.

£200,000 is twice as much as £100,000.

scoobyjones1

Malthusian said:

scoobyjones1 said:

How does "saving twice as much" account for inflation? Unless you can find a savings interest rate above inflation...which I haven't seen? 

If:

• you want to have £100,000 in 20 years' time, in today's money
• and investments hold their value against inflation (never guaranteed, but a more than reasonable assumption for a 20 year investment)
• and cash loses value at 3%pa (depends on how assiduous you are at switching accounts, but cash generally returned minus 2-3% in real terms in the zero interest rate environment, which plummeted to minus 5%pa in the recent era of 5% interest and 10% inflation)

Then today you would need £100,000 invested in investments or £200,000 saved in cash. Roughly speaking.

£200,000 is twice as much as £100,000.

To me you are just throwing money away if you do that. I know you do not want the stress of risk but 100k in a normal savings bank will lose you a lot of money in real terms, over 20 years.
200k will lose you double that amount, in real terms.

You would have to be really unlucky to lose money against inflation over a 20 year period in a relatively safe stock market fund with the huge benefit of compound interest, gains on your gains. And on the other extreme, if you had put just $10k into Apple, 20 years ago that would be worth $5.08 million today!

Surely diversity would be better. With £200k you could buy a small property...or put some in stocks, some in bonds, premium bonds maybe and some in savings accounts or ISAs with easy access?

scoobyjones1

IanManc said:

scoobyjones1 said:

eskbanker said:

scoobyjones1 said:

eskbanker said:

scoobyjones1 said:
ISA's have become extremely popular since these thresholds were cut. My only worry is that they may mess around with ISA allowances next...given time :-(

• January 2023 sees online Bed & ISA applications more than double year on year, up 122%
• In December 2022, online Bed and ISA applications were up 90% year on year
• In November 2022 online Bed & ISA applications rose by 72% year on year

So, far from discouraging investors, the cuts have simply encouraged them to make more use of the existing tax wrappers to shelter their holdings from tax, which has consistently been recommended as good practice for years?  We're now in the seventh year of the annual ISA allowance being £20K - obviously that's not guaranteed to be cast in stone for perpetuity but make hay while the sun shines!

Obviously those people were already investors, using bed and ISA's to move their assets, desperate to protect themselves from the swingeing threshold cuts. They were also desperate to use last years £12k allowance...hence the uptick in bed and ISA's and similar. 122%! When the CGT threshold is only £3k, next year, this will most definitely discourage new investors. You won't even be able to re balance and organise your portfolio without liability. 

But the point is that all investors, new and old, can shelter £20K per year from all taxation, and within that ISA wrapper they can rebalance and organise to their hearts' content.

20k? Whoop de doo!

A comment like that shows how far removed you are from the financial situation and real lives of most people in this country.

Being able to put £20k a year, every year, into an ISA is well beyond the means of the bulk of the population, and it represents a generous tax break for people with wealth.

If you look at it like that of course that sounds like I am far removed from most people but that is not my situation at all. I am trying to access some very old shares, intended as a pension for me and my wife, at the end of my life. I am not able to put away 20k new cash a year. The 20k is just an allowance....it is not a gain. That would be nice!

Sorry I was flippant about the 20k, ISA allowance. It's not a lot if you think an average house now is 300k. To put old shares into a new ISA you have to sell them first...and be taxed. These are not new earnings.

I have worked hard for 45 years with multiple jobs and businesses, paying tax on all of it. I am not out of touch with reality. I have kids and grandkids and it would be nice to be able to help them a little bit more, instead of paying yet more tax. 

Eco_Miser

scoobyjones1 said:

IanManc said:

scoobyjones1 said:

eskbanker said:

scoobyjones1 said:

eskbanker said:

scoobyjones1 said:
ISA's have become extremely popular since these thresholds were cut. My only worry is that they may mess around with ISA allowances next...given time :-(

• January 2023 sees online Bed & ISA applications more than double year on year, up 122%
• In December 2022, online Bed and ISA applications were up 90% year on year
• In November 2022 online Bed & ISA applications rose by 72% year on year

So, far from discouraging investors, the cuts have simply encouraged them to make more use of the existing tax wrappers to shelter their holdings from tax, which has consistently been recommended as good practice for years?  We're now in the seventh year of the annual ISA allowance being £20K - obviously that's not guaranteed to be cast in stone for perpetuity but make hay while the sun shines!

Obviously those people were already investors, using bed and ISA's to move their assets, desperate to protect themselves from the swingeing threshold cuts. They were also desperate to use last years £12k allowance...hence the uptick in bed and ISA's and similar. 122%! When the CGT threshold is only £3k, next year, this will most definitely discourage new investors. You won't even be able to re balance and organise your portfolio without liability. 

But the point is that all investors, new and old, can shelter £20K per year from all taxation, and within that ISA wrapper they can rebalance and organise to their hearts' content.

20k? Whoop de doo!

A comment like that shows how far removed you are from the financial situation and real lives of most people in this country.

Being able to put £20k a year, every year, into an ISA is well beyond the means of the bulk of the population, and it represents a generous tax break for people with wealth.

If you look at it like that of course that sounds like I am far removed from most people but that is not my situation at all. I am trying to access some very old shares, intended as a pension for me and my wife, at the end of my life. I am not able to put away 20k new cash a year. The 20k is just an allowance....it is not a gain. That would be nice!

Sorry I was flippant about the 20k, ISA allowance. It's not a lot if you think an average house now is 300k. To put old shares into a new ISA you have to sell them first...and be taxed. These are not new earnings.

I have worked hard for 45 years with multiple jobs and businesses, paying tax on all of it. I am not out of touch with reality. I have kids and grandkids and it would be nice to be able to help them a little bit more, instead of paying yet more tax. 

Since you don't have 20k new cash available to put in an ISA every year, you should have been transferring those old shares into an ISA  20k (or whatever the CGT allowance allowed) at a time for the past 7 years (or the smaller amounts available previously), then getting the dividends and capital gains tax exempt. 

Too late you you now of course, but it's what I did, and the reduction in CGT allowance has had no effect on me, unlike the frozen Personal Allowance which means I'm now paying tax on my pension.

scoobyjones1

Eco_Miser said:

scoobyjones1 said:

IanManc said:

scoobyjones1 said:

eskbanker said:

scoobyjones1 said:

eskbanker said:

scoobyjones1 said:
ISA's have become extremely popular since these thresholds were cut. My only worry is that they may mess around with ISA allowances next...given time :-(

• January 2023 sees online Bed & ISA applications more than double year on year, up 122%
• In December 2022, online Bed and ISA applications were up 90% year on year
• In November 2022 online Bed & ISA applications rose by 72% year on year

So, far from discouraging investors, the cuts have simply encouraged them to make more use of the existing tax wrappers to shelter their holdings from tax, which has consistently been recommended as good practice for years?  We're now in the seventh year of the annual ISA allowance being £20K - obviously that's not guaranteed to be cast in stone for perpetuity but make hay while the sun shines!

Obviously those people were already investors, using bed and ISA's to move their assets, desperate to protect themselves from the swingeing threshold cuts. They were also desperate to use last years £12k allowance...hence the uptick in bed and ISA's and similar. 122%! When the CGT threshold is only £3k, next year, this will most definitely discourage new investors. You won't even be able to re balance and organise your portfolio without liability. 

But the point is that all investors, new and old, can shelter £20K per year from all taxation, and within that ISA wrapper they can rebalance and organise to their hearts' content.

20k? Whoop de doo!

A comment like that shows how far removed you are from the financial situation and real lives of most people in this country.

Being able to put £20k a year, every year, into an ISA is well beyond the means of the bulk of the population, and it represents a generous tax break for people with wealth.

If you look at it like that of course that sounds like I am far removed from most people but that is not my situation at all. I am trying to access some very old shares, intended as a pension for me and my wife, at the end of my life. I am not able to put away 20k new cash a year. The 20k is just an allowance....it is not a gain. That would be nice!

Sorry I was flippant about the 20k, ISA allowance. It's not a lot if you think an average house now is 300k. To put old shares into a new ISA you have to sell them first...and be taxed. These are not new earnings.

I have worked hard for 45 years with multiple jobs and businesses, paying tax on all of it. I am not out of touch with reality. I have kids and grandkids and it would be nice to be able to help them a little bit more, instead of paying yet more tax. 

Since you don't have 20k new cash available to put in an ISA every year, you should have been transferring those old shares into an ISA  20k (or whatever the CGT allowance allowed) at a time for the past 7 years (or the smaller amounts available previously), then getting the dividends and capital gains tax exempt. 

Too late you you now of course, but it's what I did, and the reduction in CGT allowance has had no effect on me, unlike the frozen Personal Allowance which means I'm now paying tax on my pension.

Yes, with hindsight that's what I should've done but I foolishly believed them when they said they were freezing it until 2025 at least. That would have worked out perfectly and got me to my State Pension...almost (they moved that as well). With an election coming I am still shocked at what they have done. IMO, this will lose them a lot of votes as they have encouraged people to buy shares, property...buy to let landlords and the rest. That's not me thankfully.

Anyway, it would have been a lot of fiddly work and expense to move my US shares into UK ISAs. I would have to sell them to pounds, losing on currency conversion fees, and then buy them again with pounds to dollars, pay fees again. I will start again and have a rethink but it's not too late and I will be fine. My wife and I will build up ISAs, albeit that's harder now with having to realise gains and the lower allowance. Even with UK shares you get hit with stamp duty.

I'm glad you managed to organise yours better but as you know...they get you one way or the other. The frozen PA is costing millions of people lot's of money and taking cash out of the economy. Crazy that you have to pay tax on your pension...penalised for hard work, saving and investing. You best spend it before you die...otherwise they will tax you again! Best.

Reed_Richards

Your pension contributions are made from your income before tax but pension payments are subject to income tax.  Your ISA contributions come from your taxed income (generally) but ISA withdrawals are not subject to tax.  So you either get taxed at the end or taxed at the beginning, but not both, or neither.  

eskbanker

scoobyjones1 said:

My problem with hindsight was that I trusted this Government in 2019/20 when they said that CGT allowances would be frozen until at least 2025.

scoobyjones1 said:
I foolishly believed them when they said they were freezing it until 2025 at least. That would have worked out perfectly and got me to my State Pension...almost (they moved that as well).

Just as a point of factual accuracy, the frozen CGT allowance was very short-lived rather than being something that could or would have been relied on for a significant period, as highlighted earlier in the thread:

eskbanker said:

The freeze was announced in 2021 and the reversal of that policy in 2022

scoobyjones1

Reed_Richards said:

Your pension contributions are made from your income before tax but pension payments are subject to income tax.  Your ISA contributions come from your taxed income (generally) but ISA withdrawals are not subject to tax.  So you either get taxed at the end or taxed at the beginning, but not both, or neither.  

Yes Reed, so long as you have a pension, enough ISA allowance or a SIPP you are ok. I am having trouble because these are old earnings. I am not earning anything else now and was living off old gains. I would have been fine with the previous allowance at 12k and there was no hint that this would be halved and then quartered when I set up my investment account and planned my retirement. Life gets in the way and I was too busy to re-arrange things until now. I also would have been fine if I had received my Gov pension at 65, but they put that up to 67.5. 

The big picture here is the way they have cut CGT allowance AND frozen the personal allowance at a time of huge inflation. This means now that the State Pension is just below the allowance and anyone that worked and tried to build themselves a better, private pension is being taxed again. The allowance is too low for everyone, including pensioners. I also find it amazing that people seem to justify this or just accept it. We are being clobbered for tax at a level not seen since WWII. Is no one else upset about that?!