CGT liability on gift of shares to wife

[GW]

Hi, can anyone give me advice on a proposed gift of shareas to my wife?

I am currently a basic rate tax payer but, as a result of the changes to tax allowances in 2011/12 announced in the recent budget (and in particular the reduction in the higher rate threshold to £34,900), I am likely to pay higher rate tax on the dividends received on my modest shareholding from next year.

If I gift these shares to my wife, whose income is well below the higher rate tax threshold, so that she receives the income in the future, does this gift generate a potential CGT liability for me (asssuming, of course, that the share price at the time of the gift is greater than the acquisition price - which it isn't at the moment!)?

I'm aware that transfers of assets between husband and wife are on a "no gain/no loss" basis but I'm not sure what this means.

If I decide to proceed with the transfer, does this establish a new "base price" for CGT purposes (ie the share price at the date of transfer) - and thus a potential CGT liability for me - or is my wife deemed to have acquired the shares at the price at which I acquired them - in which case I assume that there is no CGT liability for me?

Any advice would be greatly appreciated. Thanks.

[Lee Young]

The transfer does not cause a CGT bill, but when your wife comes to dispose of them she will have your base cost from which to calcualte the gain.

[GW]

Many thanks for such a speedy and helpful response!

[Peter D]

Not sure where you get £34,900 form the threshold is £37,400 as per http://www.hmrc.gov.uk/rates/it.htm
but the personal allowance for higher rate will drop by £1000 7745 to 6745.
Regards Peter

[GW]

Peter D

Yes, the basic rate tax "band" for 2010/11 is £37,400.

According to the Telegraph last Saturday (Your Money, p2), this will drop to £34,900 from next April.

Regards.

[maths]

but the personal allowance for higher rate will drop by £1000 7745 to 6745.

This is not correct.

The current proposal is that effective 6.4.11 the basic rate limit of £37,400 will be reduced to £34,900 for higher rate taxpayers; the personal allowance remains for such people at £7,745 (subject to the excess of £100,000 rule).

[Peter D]

Tanks Maths I missed that. Nasty.
"The basic rate limit will be reduced by £2,500 and the higher rate threshold by £1,650. The national insurance upper earnings/profit limit will also be reduced to keep it in line with the income tax higher rate threshold "

Regards Peter

[Peter D]

HMRC relly need to remove old pages from their web site, as usual. Regards Peter

[Peter D]

Sorry Typo. really. Regards Peter