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#1: CGT Annual exemption question

Posted on 2006-07-21 15:53:38 by Baglady

I am selling an asset which is held in joint names between myself and my
wife. My wife is a non-tax payer. Is she entitled to the CGT annual
exemption and is her personal allowance (for Income Tax purposes) take into
consideration?
I realise that as a Tax Payer I qualify for both.
Many Thanks.

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#2: Re: CGT Annual exemption question

Posted on 2006-07-21 17:22:11 by Ronald Raygun

Baglady wrote:

> I am selling an asset which is held in joint names between myself and my
> wife. My wife is a non-tax payer. Is she entitled to the CGT annual
> exemption and is her personal allowance (for Income Tax purposes) take
> into consideration?

Yes she is and no it isn't.

> I realise that as a Tax Payer I qualify for both.

Everyone qualifies for both, but the CGT annual exempt amount can
only be used against capital gains, not against other income, and
the personal allowance can only be used against other income, and
not against capital gains.

So, the CGT AE being £8800 this year, between the two of you you can
have a joint gain of £17600 before any CGT becomes payable. If the
gain is much above that, you may need to consider shifting the notional
ownership shares around a bit to minimise the tax bill.

Of her share of the gain, the first £8800 is exempt, the next £2150 are
taxed at 10%, and the next £31150 at 20%, and the rest at 40%.

Of your share of the gain, the first £8800 is exempt, the next £X at 20%
(if £X is positive) and the rest at 40%. This assumes your "normal"
income exceeds the personal allowance by £Y, that £Y is at least £2150,
and that £X is £33300-£Y.

So you want to arrange ownership proportions in such a way that the
first £17600 of joint gain are shared 50-50, the next £Z of gain
are hers alone (where £Z is the smaller of £33300 and £Y), and the
rest can be 50-50 again.

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#3: Re: CGT Annual exemption question

Posted on 2006-07-21 17:40:42 by missltoemissltoe

> So you want to arrange ownership proportions in such a way that the
> first £17600 of joint gain are shared 50-50, the next £Z of gain
> are hers alone (where £Z is the smaller of £33300 and £Y), and the
> rest can be 50-50 again.

And see if you can sell part of the asset next tax year and use that
allowance.

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