Tax dodge of the week: act fast to save on CGT
Indexation relief is disappearing on 6 April when the new capital gains tax (CGT) flat rate of 18% comes into force, so use it now, says Mike Warburton in The Daily Telegraph. You will, however, need a helpful – and trustworthy! – spouse.
Indexation relief was introduced in March 1982 and continued until April 1998 – when it was frozen at the amount it had built up by that date – in recognition of the fact that inflation was forcing people to pay CGT on illusory gains.
The relief lets you raise the base cost of your asset for capital gains purposes to adjust for the impact of inflation, using a so-called indexation allowance. Although the relief ends on 6 April, it should be possible to retain it by simply “giving assets to your spouse”.
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For example, if an asset were bought in July 1982 for £10,000 it will have a base cost with indexation of about £20,000, which will remain even after April if you transfer those assets to your spouse, potentially reducing a future CGT bill on disposal by as much as £1,800.
Act quickly, though. Leave it for more than another week and this window of opportunity will have closed.
