Capital Gains Tax On Money Gifts
What Is Capital Gains Tax On Money Gifts?
Capital Gains Tax (CGT) is a tax imposed on money gained from the sale of assets such as property, stocks, bonds, and investments. It applies to both individuals and companies and the amount of tax that needs to be paid is determined by the value of the asset and the amount of time it was held. The same rules apply to gifts of money given to individuals and companies. If the value of the money given is more than the donor’s annual exemption, then CGT must be paid on the excess amount.
When Is Capital Gains Tax On Money Gifts Due?
CGT on money gifts is due when the gift is given. For individuals, the CGT rate is 18% or 28% depending on the donor’s total taxable income. Companies must pay 28% on any money gifts they receive. When calculating the amount of tax due, the donor must deduct any allowable expenses that relate to the gift.
What Are Allowable Expenses?
Allowable expenses are costs that are incurred in the process of making a gift and can be deducted from the amount of CGT due. Examples of allowable expenses include any legal or professional fees, travel costs, and the cost of the gift itself. It is important to note that all allowable expenses must be properly documented to be eligible for deduction.
Who Is Exempt From Capital Gains Tax?
In some cases, certain individuals, such as spouses and civil partners, may be exempt from paying CGT on money gifts. In addition, gifts to charities, political parties, and certain other organisations are also exempt from CGT. Gifts of up to £3,000 per tax year for individuals and £5,000 for companies can also be made without incurring any CGT.
What Other Taxes Are Relevant To Money Gifts?
In addition to CGT, gifts of money are also subject to Inheritance Tax (IHT). IHT is a tax imposed on money and other assets given away by an individual or company in their lifetime. The amount of IHT due is determined by the total value of the gift, the relationship between the donor and the recipient, and the period of time the gift has been held. If the total value of the gift exceeds the IHT threshold, tax must be paid on the excess amount.
What Are The Benefits Of Making Money Gifts?
Making money gifts is a great way to support family and friends, as well as charities and other organisations. It can also be used as a tax-efficient way of transferring wealth, as CGT and IHT can be avoided if the gift meets certain criteria. In addition, making money gifts can help to reduce the donor’s overall tax liability and can also help to reduce the amount of Inheritance Tax due on the donor’s estate.
Conclusion
Capital Gains Tax on money gifts is a tax imposed on money given to individuals and companies. The amount of CGT due is determined by the value of the gift and the amount of time it has been held. Most individuals and companies are subject to CGT, though some may be exempt. In addition, gifts of money may also be subject to Inheritance Tax, depending on the value of the gift and the relationship between the donor and the recipient. Making money gifts is a great way to support family and friends, as well as charities and other organisations, and can also be used as a tax-efficient way of transferring wealth.
