Learn When you don’t have to pay Capital Gains Tax

Understanding Capital Gains Tax (CGT) can be tricky, but it’s really important. In this article, we’ll break down when you might not have to pay it. Whether it’s giving assets to your spouse, going through a divorce, or donating to a charity, this info could help you save on taxes.

Transfer of Assets to Spouse or Civil Partner

A commonly misunderstood aspect of Capital Gains Tax in the UK is its application in the transfer of assets between spouses or civil partners. Usually, there is no Capital Gains Tax to be paid on such transfers. However, even though you might not have to pay CGT immediately, the taxman considers this a disposal for CGT purposes. The gain or loss, when the asset is eventually sold, will be calculated from the point the original spouse or civil partner owned it.

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Separation and Divorce: Navigating the CGT Maze

The rules change somewhat for couples undergoing separation or divorce. Recent amendments effective from 6th April 2023 allow separating spouses and civil partners a period of up to three years after they cease cohabiting to make no gain/no loss transfers. Furthermore, there’s an unlimited timeframe for assets subject to a formal divorce agreement.

Previously, the no gain/no loss treatment was applicable only for disposals during the tax year in which separation occurred. If a transfer doesn’t qualify for relief retrospectively, the asset must be valued at the date of the transfer, and the entity making the transfer is liable for any gain or loss.

Gifting Assets to Charities

For those considering contributing to charitable organisations, assets gifted to charities generally don’t attract Capital Gains Tax. However, if an asset is sold to a charity for more than its purchase price but less than its market value, CGT may be due. In this case, the gain would be calculated based on the price the charity paid, not the market value.

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