Question
I have shares with a current value of £50,000 invested across 6 companies. I shall be 74 years of age this year and my wife, who is named on the majority of the shares, will 76 this year. We own our house with an approx value of £220,000.
Should we be considering selling some of the shares to avoid Capital Gains Tax when we pass away? We are leaving our estate to 1 son and 1 daughter.Answer
As things stand at the moment none of your family would appear be troubled by capital gains tax or inheritance tax when you or your wife passes away.
Any capital gains on your shares will die with you. If you leave the shares to your children they would be treated as having acquired them at the market price on the date of death. Should your children subsequently sell then this would be the purchase price used when calculating the capital gain for tax purposes, not the price you originally paid.
Both you and your wife currently enjoy inheritance tax exemptions of £325,000 each. If you leave everything to each other on first death (which would be exempt from inheritance tax) then the unused allowance can be rolled into the other on the second death, giving an overall allowance of £650,000 – ample for your assets. So, unless there’s a major change, inheritance tax is unlikely to be a threat.
Nevertheless, it might still make sense to keep capital gains tax at bay while you’re still alive. If you or your wife suddenly needs to sell the shares for some reason, you don’t want to be landed with a tax bill. You can both realise gains of up to £10,100 each before 6 April and the same amount thereafter, more than enough I should imagine to strip out the gains in your portfolio.
To realise a gain you’ll have to sell shares (and wait 30 days if you wish to repurchase shares in the same company). If you decide to do this make sure you shop around for a cheap stockbroking deal, the going rate seems to be about £20 for certificate trades and £10 if electronic. If you originally purchased the shares before 31 March 1982 then you should treat the purchase price as their value on that day, else it'll be the amount you paid for them.
As an aside, you might consider reducing investment risk by spreading your money across more than six companies, perhaps by moving some money into investment funds. You’ll have to pay fund management charges, but you might view this as being worthwhile for the extra diversification it could bring.
I have shares with a current value of £50,000 invested across 6 companies. I shall be 74 years of age this year and my wife, who is named on the majority of the shares, will 76 this year. We own our house with an approx value of £220,000.
Should we be considering selling some of the shares to avoid Capital Gains Tax when we pass away? We are leaving our estate to 1 son and 1 daughter.Answer
As things stand at the moment none of your family would appear be troubled by capital gains tax or inheritance tax when you or your wife passes away.
Any capital gains on your shares will die with you. If you leave the shares to your children they would be treated as having acquired them at the market price on the date of death. Should your children subsequently sell then this would be the purchase price used when calculating the capital gain for tax purposes, not the price you originally paid.
Both you and your wife currently enjoy inheritance tax exemptions of £325,000 each. If you leave everything to each other on first death (which would be exempt from inheritance tax) then the unused allowance can be rolled into the other on the second death, giving an overall allowance of £650,000 – ample for your assets. So, unless there’s a major change, inheritance tax is unlikely to be a threat.
Nevertheless, it might still make sense to keep capital gains tax at bay while you’re still alive. If you or your wife suddenly needs to sell the shares for some reason, you don’t want to be landed with a tax bill. You can both realise gains of up to £10,100 each before 6 April and the same amount thereafter, more than enough I should imagine to strip out the gains in your portfolio.
To realise a gain you’ll have to sell shares (and wait 30 days if you wish to repurchase shares in the same company). If you decide to do this make sure you shop around for a cheap stockbroking deal, the going rate seems to be about £20 for certificate trades and £10 if electronic. If you originally purchased the shares before 31 March 1982 then you should treat the purchase price as their value on that day, else it'll be the amount you paid for them.
As an aside, you might consider reducing investment risk by spreading your money across more than six companies, perhaps by moving some money into investment funds. You’ll have to pay fund management charges, but you might view this as being worthwhile for the extra diversification it could bring.
Read this Q and A at http://www.candidmoney.com/questions/question115.aspx
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