IHT/CGT and gift Q
Discussion
Quick Q: Let's say you gift an asset with value £X now, and die just 2 years later, when it's value has increased to £Y.
Is IHT calculated on X, or on Y ?
And, if the giftee subsequently sells the asset when it's value has further increased to £Z, is CGT calculated on Z minus X, or Z minus Y ?
Is IHT calculated on X, or on Y ?
And, if the giftee subsequently sells the asset when it's value has further increased to £Z, is CGT calculated on Z minus X, or Z minus Y ?
xeny said:
Abc321 said:
Answer to Q2: Z - £3,000 (currently), this figure is reducing dramatically, probably to the point where it is just Z.
I thought that CGT was calculated on sale price-price at time of gift (less CGT allowance obviously?silentbrown said:
xeny said:
Abc321 said:
Answer to Q2: Z - £3,000 (currently), this figure is reducing dramatically, probably to the point where it is just Z.
I thought that CGT was calculated on sale price-price at time of gift (less CGT allowance obviously?
... and the answer I was hoping for 
This isn't answering the question but old-timers need to stay alert to the way CGT and IHT interact.
Broadly speaking any "disposal", whether by sale or gift, is an event that triggers a CGT charge. However, death does NOT trigger a CGT charge - the IHT regime applies instead.
For practical purposes this means old-timers ought to try to avoid paying CGT in their later years - that just has the effect of dramatically increasing the tax payable upon death. In an extreme case it can, in very round numbers, be the difference between paying 40% tax and 60% tax.
And a word of warning about CGT - it's one of the few taxes that can have severe retro-active effect.
Let's say you own today an asset you've owned for 20 years that's doubled in value from £100k to £200k. A gain of £100k. If you dispose of that asset today you'll pay CGT of around £20k. The real world value of the asset may not have changed - the price increase might all be just inflation - but you pay £20k of tax on those 20 years inflation.
Now assume a new government increases the rate of CGT from 20% to 40%. That doesn't just increase the tax you pay on this year's inflation - it increases the tax one every year of inflation throughout those 20 years! Ouch.
Broadly speaking any "disposal", whether by sale or gift, is an event that triggers a CGT charge. However, death does NOT trigger a CGT charge - the IHT regime applies instead.
For practical purposes this means old-timers ought to try to avoid paying CGT in their later years - that just has the effect of dramatically increasing the tax payable upon death. In an extreme case it can, in very round numbers, be the difference between paying 40% tax and 60% tax.
And a word of warning about CGT - it's one of the few taxes that can have severe retro-active effect.
Let's say you own today an asset you've owned for 20 years that's doubled in value from £100k to £200k. A gain of £100k. If you dispose of that asset today you'll pay CGT of around £20k. The real world value of the asset may not have changed - the price increase might all be just inflation - but you pay £20k of tax on those 20 years inflation.
Now assume a new government increases the rate of CGT from 20% to 40%. That doesn't just increase the tax you pay on this year's inflation - it increases the tax one every year of inflation throughout those 20 years! Ouch.
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