Maximising CGT allowances?

[JOHNRE]

Hello everyone, hope you can help.....
Back in 2014 my wife and I bought an apartment with a tenant in. As she was a non-taxpayer, we put the flat entirelty in her name. It is still tenanted and the income is below my wife's personal allowance. In a couple of years time we will be seeking to sell the property and need some guidance on how to maximise our CGT allowances whilst, at the same time, keeping the bulk of the income going to my wife (because I am very close to the 40% threshold). We also have a son and we would be happy to gift him a share of the apartment if we can then also use his CGT allowance.

I guess what I am asking is, are there any particular rules (HMRC or others), especially regarding ratios of ownership between the three of us, that we will need to follow to make sure that everything is done properly and the majority of the rental income still goes to Mrs JohnRe?

Any advice would be greatly appreciated.

John

[maths]

To mitigate any CGT charge on a future sale, whoever currently has legal title could execute a declaration of trust under which (for example) you give the greater proportion to your wife (be that 100%; 90% etc).

You could also include your son as appropriate.

[JOHNRE]

Many thanks for the reply.......if my wife were to gift 5% of the flat to me and 5% to the son, would that mean all three of us could utilise our FULL CGT allowance when the flat is sold, despite not having equal %s?

[Peter D]

It depends. Is a 5% share large enough to make a gain of more than £11,100 capital gain. I suggest not.
Whilst you can gift part of the property to your husband there are restrictions to your son's share. He may bump into SDLT issues.
Regards Peter

[JOHNRE]

Thanks Peter, if she were to gift us both 33%, this would, presumably, mean we could all use our full CGT allowances at the point of sale? However, would that mean that, in the meantime, any rental income from the flat would also have to be equally apportioned for tax purposes?

[JOHNRE]

Peter, could you possibly explain why my wife gifting part of the flat to our son would trigger stamp duty? Don't understand, sorry!

[JOHNRE]

Peter, I should point out that the flat was bought for £240K and is currently worth about £260K and we will probably end up selling it for around £275K.

[maths]

An SDLT charge could only possibly arise if the property was mortgaged; even then it can be simply circumnavigated.

Each person is entitled to offset the annual exempt amount.

Each person's rental entitlement would need to be in line with their beneficial interests. Rental income attributed to child's share (if he/she is a minor) will still be taxed on part of wife.

[JOHNRE]

Thanks, Maths - from your knowledge, what is the relationship between equity ownership and the ability to utilise the annual CGT allowance? If, for example, one of the owners had 10% of the equity, would he/she only be allowed to claim their allowance against 10% of the capital growth of the asset? This is something that I do not understand......

[maths]

EG
Property worth 200,000. Original cost 50,000. Owned by wife.

Wife gifts husband 10%.

Husband's base cost 5,000.
Husband's sale amount 20,000

Gain 15,000
Less exempt amount 11,100

Net gain 3,900.