:: save tax ::

52 Ways To Save Tax #14

There are lots of ways that you can reduce the amount of tax that you can pay. And, with a range of different taxes affecting everything from your income to your insurance, the ways of mitigating the tax that you pay vary depending on the type of tax.

Capital Gains Tax can be charged on the profit or gain made when you sell, gift, transfer, exchange or dispose of an asset. If you’re a higher rate taxpayer then you can face a tax bill of up to 28 per cent but there are ways to reduce the amount that you pay.

Keep reading to find out how transferring assets that you own into joint names or into the name of your spouse/partner can help you to reduce the amount of Capital Gains Tax that you pay.

52 Ways to Save Tax – Part 14 : Transfer assets to your spouse/partner

Capital Gains Tax (CGT) is payable on the profit that you make when you sell or gift an asset. And, like other types of tax, each individual has an annual personal CGT allowance.

John Fletcher, director of financial planning at Brewin Dolphin, explains: “Each individual has a personal CGT allowance every year (6 April to 5 April), which for many investors is sufficient for avoiding a CGT liability.

“Any gains in excess of the allowance are charged to CGT at either 18 per cent or 28 per cent, depending on the individual’s other total taxable income in the year the gain arises.”

The current personal CGT allowance (tax year 2015/16) is £11,100 and this applies when you sell assets such as shares or a house. It effectively means that in the 2015/16 tax year you can make a profit of £11,100 on an asset (or assets) before you pay any tax on the gain.

One way to reduce the amount of CGT that you pay is to consider transferring assets into joint names or to your spouse or partner’s name. Transfer between spouses is currently exempt from CGT which means that assets can be transferred between husband and wife or civil partners so that both annual CGT allowances are used.

By transferring an asset into your joint names, you can both make use of your tax-free CGT allowance so that up to £22,200 of any gain can be tax-free in 2015-16. For example, transferring a rental property into joint names means that you can benefit from £22,200 ‘tax free gain’ when you come to sell the asset.

Remember that the transfer to your spouse or partner must be a genuine outright gift.

Mel Kenny of advisers Radcliffe & Newlands says: “Those in poor health may have worries about their financial planning and paying too much tax.

“One consideration for married couples with big gains sitting on their assets is to transfer these assets of the spouse in good health to the spouse in poor health so that capital gains are wiped out on death and the value is rebased from that date.”