The Business Exchange Swindon & Wiltshire Edition 47: Feb/March 2020 | Page 12

FINANCE
Capital Gains Tax (CGT)
Explained - Marriage & Divorce
When a person gives/sells shares, investment properties etc. to a spouse,
the transfer is deemed to be at a no gain/no loss value – so no CGT to pay.
By transferring a half share of an investment property to your spouse prior
to selling it, you can double the tax-free Capital Gain (annual exemption of
£12,000 (2019/20)). Also, if you pay Higher Rate Tax (40%) and your spouse
pays Income Tax at a low rate you could save some Higher Rate Income Tax
by transferring shares to them.
CGT & unmarried couples
In contrast, when a person transfers shares
or property to a girl/boyfriend, a Capital
Gains calculation based on market value
will need to be made – and CGT may be
due. Valuing unlisted shares is difficult and
carries the risk of a challenge from HMRC.
CGT & divorcing couples
Getting married is ‘a great piece of tax
planning’ (re CGT and Inheritance Tax), but
getting divorced brings its own tax problems.
The CGT benefits of marriage (transfers at
no gain/no loss) last until the end of the tax
year in which the spouses separate. After
that, CGT can apply on transfers between
the divorcing/separating parties, even when
no actual sale takes place.
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If one leaves the matrimonial home and
there are assets to be divided, it may be
better to separate shortly after the 6th April,
than shortly before, giving more time to
organise the various assets before the end of
the tax year.
As always, seek professional advice.
Search AMS Accountancy on YouTube and
watch their 80+ informative videos.
Advice for small businesses
AMS Accountancy Ltd. 01793 818400
Common mistakes made in Self-Assessment Tax Returns
Read the guidance notes – and possibly, see an accountant. Under-
declaring income can cost you penal�es and interest!
Buy-to-let - Anyone making a profit of the sale of a Buy-to-let property
must include details within the Capital Gain Tax sec�on.
Foreign income – you must declare this unless you are a non-resident
and/or a non-domiciled taxpayer.
Child benefit - People with income above £50,000, must include their
child benefit. This catches people out, especially when earnings have only
just exceeded £50,000 (or they have recently become parents).
Pension contribu�ons - To summarise:
§ Contribu�ons paid by the employer, or under salary sacrifice
arrangements, can be omi�ed.
§ Contribu�ons where tax relief is given through PAYE can be omi�ed.
§ Contribu�ons made by employees that don’t reduce tax via their
payroll SHOULD be included in the Return, to avoid missing out on
Higher Rate Tax relief.
Peter Bromiley ACA
80+ videos on
@AMSAccountancy
www.ams-accountancy.co.uk
‘AMS Accountancy’