How does a capital gains tax work?
Broadly, when an individual/limited company/chargeable person disposes off a capital/chargeable asset at a profit, a capital gain arises. Individuals currently pay CGT at 10% / 20% based on the level of their other income. Sale of UK residential property attract higher CGT rates of 18% and/or 28%. Limited companies do not pay capital gains tax rates but instead pays corporation tax on its gain.
Commonly, an individual would sell an asset to realise a gain however a gift can sometimes also constitute a disposal for capital gains tax purposes. It is therefore important to take advice (in writing) that your desired transaction will not trigger a capital gains tax charge on yourself. Provisions are available in the legislation for the loss of the asset to be treated as a capital disposal for CGT purposes however each event would need to be looked into in isolation to apply such rules.
A technical point to note here is that death is not chargeable point for capital gains tax purposes.
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