Many individuals make gifts and there is a common misconception that there will be no tax arising. However, this may not be the case since a gift to another individual is treated as a disposal at market value for tax purposes and, if the value is not already known, a donor will need to obtain a valuation of the asset from someone qualified to assess its current market value.
A gift is subject to capital gains tax on the uplift in value above its acquisition cost. However, there are some reliefs such as main residence relief for any period when a property was the donor’s main residence and transfers between spouses are exempt from capital gain tax.
A gift is also subject to inheritance tax and is treated as a potentially exempt transfer. The transfer will be exempt if the donor survives for seven years after the date of the gift. The gift will be totally exempt if it is made to a UK domiciled spouse.
The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.