Capital Transfer Tax

The old death duties (estate duty) were abolished in 2016/75 and were replaced by capital transfer tax. CTT is designed not only to tax large estates of deceased persons but also to prevent avoidance of such tax by a person's giving away his estate before he dies. CTT is payable both on transfer of assets at death and on transfers during life, albeit at a lower rate. It is payable by the recipient unless the transfer is made 'free of CTT'.

Capital transfer tax is a complex subject and here we shall do little more than outline the principles in order to give the reader a complete bird's-eye-view of the entire direct tax structure of the United Kingdom.

The general rule is that transfers of assets by way of lifetime gift or legacy are taxable. The rates of tax are progressive, as are the rates of income tax - higher rates being payable on successive slices of capital - and the progressive rate applies to all transfers commencing from the birth of a person right through to, and including, his death. To determine the tax rate payable one has thus to add together all previous transfers of chargeable assets throughout life.

Exemptions and reliefs. These include the following, although there are others.

1. Transfers of assets between spouses, both during life and at death, are exempt.

2. The first £25,000 of cumulative chargeable transfers, year by year during life and at death, is chargeable at a nil rate.

3. Even before (2) above is calculated, the first £2,000 of lifetime gifts during any tax year is exempt. One year's allowance, if not used, can be carried forward to the next year, but not to subsequent years.

4. Additionally, the first £100 of gifts to any one person in a tax year is exempt.

5. All gifts made out of taxed income and forming part of the normal expenditure pattern such as birthday presents, are exempt.

6. Certain gifts to charities, and in consideration of marriage, are also exempt.

Rates of CTT. On transfers other than those that are exempt, the rate of CTT payable at death starts at 10% and rises to 75% for transfers exceeding £2 million. The rates for lifetime chargeable gifts are half of these rates up to around the £100,000 level, but the abatement in the rate falls thereafter until at £500,000 the rates for lifetime gifts become the same as for gifts at death.

Capital Gains Tax

The first is a direct tax that has to be paid on any capital gain made in a tax year on the sale or realisation of an asset. The usual assets involved are investments - both portfolio investments such as stocks and shares and real investments such as investment properties or valuable paintings. Profits realised on the sale of the following are specifically exempt:

(a) your own main residence;

(b) your private car;

(c) British government securities that have been held for over

one year (see Chapter 5)

(d) most personal chattels.Capital Gains Tax

Refunds, Personal And Business Finance 2017

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