If you are the one who is interested in gifting your property to someone in the family, be it your relatives or your children. This is imperative to understand that if the property you are gifting has increased its market value from the time you purchased it, you will have to pay capital gains tax on it. In simple words, we can say that this case of gifting property is dealt with just like the case of selling property for the sake of earning profits in the UK. This is why people in the UK are so inclined towards finding smart and tax-efficient ways to learn how to avoid CGT on gifted property. You must be wondering whether there are possible ways to avoid capital gains tax or not. Well according to the tax set of rules, you can avoid paying capital gains tax if you meet any one of the following conditions:
- The property you want to gift is your main home and you have lived there until now.
- You are giving your main property to your spouse.
- You are pitting the property into a trust to give benefits to your children. It is unless your children want to sell the property in the future.
Reach out to one of our professionals to get to know about how to avoid CGT on gifted property in the UK. Get in touch with us and you will be provided instant professional help!
How Do I Pay CGT for a Gifted Property?
To pay capital gains tax for a party that is gifted, you can either do it while doing your self-assessment tax returns or use the real-time capital gains tax service offered by HMRC. This was applicable only till the tax year 2020. After April 2002, only the service offered by HMRC which is known as real-time capital gains tax service can be availed to complete the procedure. This further explains the following:
- You will not get the unique tax reference rather you will get the payment reference number from HMRC.
- You will not be required to file for self-assessment tax returns anymore.
- You will have to declare your capital gains tax and then pay it within the duration of 30 days. This will keep you away from unpleasant experiences to complete the procedure.
How Much Will I Have to Pay in Form of Capital Gains Tax?
Many of you must be wondering by now how much you will have to pay in form of capital gains tax for your property. If you are an individual who is earning lower than the figure £50,000 with a tax year, you will have to pay 18% of the profits that you will earn on your property. However, if you come under the category of people who are earning more than the figure £50,000 within a tax year, you will have to pay 28 percent of the profits that you are wearing from the capital gains profits.
Moreover, you are allowed to avail of an amount of £12,300 in form of capital gains tax allowance as well. This further explains that capital gains are tax-free up to a limit amount of £12,300. In the case of earning less than this amount from your profits, no tax will be implemented on you.
Can I Sell My Property at a Low Price to Avoid Paying Capital Gains Tax?
This is not recommended by professionals to people who are planning to sell their property at a lower rate than the actual market value just for the sake of avoiding the CGT. In case you are planning to gift your property to a family member like your siblings, your parents, and your children, HMRC still has the requirements of capital gains tax just like in the case of property being paid. In case of finding illegal ways to escape capital gains tax, you will have to deal with hefty amounts of fines charged by HMRC. So it is best to get advice from an expert to avoid any unfavourable circumstances in the future.
Are There Any Other Taxes Implemented?
This is imperative to mention here that you do not have to deal with only capital gains tax in case of getting benefits from your property. There are other taxes involved in this procedure as well. This possibly can involve the implementation of inheritance tax, stamp duty payments, and rental income tax in certain cases as well. You can always get in touch with a property expert to get to know the exact tax implementation according to your situation of gifting property. This will keep you protected from any kind of penalties, fines and unfavourable circumstances charged by HMRC.
Still Not Sure if You Owe CGT?
Some of you might still find yourself in a position where you are not sure whether you owe the capital gains tax to HMRC or you do not have to pay anything. Especially in the case of beginners. You can simply reach out to an expert in this regard to get personal tax advice according to your situation. There are several capital gains tax accounting experts who can actually help to clear up the confusion. This will ensure you about the exact payment and calculation just according to your unique case and its relevant calculations.
The Bottom Line
Now that you have gathered a favour amount of information about how to avoid CGT on gifted property in the UK, we can bring the discussion towards wrapping up. Avoiding the payment of capital gains tax is a kind of tax need that attract a lot of people to get inclined towards in the UK. Because paying tax on every other thing could possibly be the last thing any resident wants to do. However, this is suggested by professionals to avoid getting caught for any illegal way of finding an escape. This will make you end up paying more than you expected. Getting in touch with the right kind of capital gains tax accounting expert can guide you just according to your unique property needs and relevant requirements of the matter. We hope these few minutes of reading will help you to develop a better understanding of handling the efficient way of avoiding the capital gains tax on gifting the property.
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Disclaimer: The information about how to avoid CGT on gifted property provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.