Giving Away Shares

[atalanta]

I am getting fed up with my BT shares being such a miserable investment. If I were to give them to my son, presumably I have to survive for 7 years before the value of the shares drops out of my estate for inheritance tax, but do I have to consider anything else ?
Would my son have to declare the shares as his income, for instance, or only the feeble twice-yearly payouts ? Should I consider anything else before making such a gift ?

[Tilly2]

Have you actually checked that you can 'give them away', Atlanta?

[Prudie]

How much would you want to give him? The limit has undoubtedly changed but about 15 years ago my father was allowed to gift me his shares up to a limit of £3000 pa. Can't remember what the limit is called. It was to do with capital gains tax rather than inheritance (I think).

[atalanta]

I am a mythological princess, not a city in the US

[Tilly2]

Oh, sorry. :-(

[-Talbot-]

Does he want the shares?

Why not sell them?

[New Judge]

Before you give them away, consider this:

BT’s current Dividend Yield (i.e. the dividend amount divided by the share price) is over 4%. There are not many places where you can earn 4% at the moment. Furthermore BT has a progressive dividend payment plan and all being well aims to increase its dividend payments by at least 10% p.a. In the last four years the increases have averaged 14%. Since 2012 they have increased by 68%.

It is true that the current share price is somewhat in the doldrums but this happens to share prices. Unless you bought them in the last four years, however, you are unlikely to be showing a capital loss and even if you are the share price is almost bound to recover.

I find it odd that you should consider giving away what is a reasonably sound and quite well paying investment because you consider it "miserable". What would you call a good investment?

[Peter Pedant]

you need to think of CGT as this counts for you as a disposal of an asset
price today minus price you bought - would be the gain

it is tax free if the amount is less than £11k

the price today gives you the value to the gift to your son
and yes it will be a problem if it is many thousands of pounds - remember your first 325k of your estate is tax free. The shares are likely to be peanuts compared to this figure

Your son would have to think of the shares as capital
and you dont declare them on a tax form
he would have to think about the income from the dividends and declare the income IF they are more than £10k
( I mean all his income from all his shares are more than 10k ) recent rule change on that

I think the above answers your questions on the tax position
whether you wanna do it or not is up to you - and is not really a tax question

[Peter Pedant]

// I find it odd that you should consider giving away what is a reasonably sound and quite well paying investment because you consider it "miserable". What would you call a good investment? //

I dont to be honest ( think it is odd )
I think it is quite a good idea and more people should do it

[New Judge]

“I think it is quite a good idea and more people should do it”

What, you think it is a good idea for people to denude themselves of assets that provide them with an income, Peter?

[atalanta]

Simple. He needs the money more than I do. And he needs a nest-egg more than I do. I am concerned with reducing inheritance tax liability. He is concerned with the future cost of a growing family. Mind you, that mention of Capital gains tax is useful ( thanks) as I have to pay some CGT in this financial year, so any gift will have to wait a couple of weeks - into next financial year, when it should be free of liability.

[Peter Pedant]

// What, you think it is a good idea for people to denude themselves of assets that provide them with an income, Peter?//

um dear dear - how can I put it ? I attend the Christie Hospital yes the one for incurable cancer - so I have been thinking quite a lot about IHT and how not to pay it ( said to be a voluntary tax)

[mikey4444]

I agree with NJ....hang on to those shares...where else are you going to get a yield of 4% ?

[New Judge]

"Simple. He needs the money more than I do."

Then just sell them and give him the money. Far less complicated.

[Peter Pedant]

jesus people just wont answer the question ....

atalanta - just before my computer turned itself off - Idid a long bit on IHT - in short two things - gifts to the same person within 7 y are concatenated ( clock for the first gift is reset to the date of the second ) this effectively makes it a 14 y rule
and in gifts before time - everyone thinks the capital sum is tapered in 7 years whereas the rate of interest is tapered on the constant same capital sum

[New Judge]

So then, the question:

"Would my son have to declare the shares as his income, for instance..."

No. They are not income. If he sells them he may be liable to CGT depending on the value of them when he acquired them and the value when he sold them (assuming the gain took him beyond the CGT annual allowance).

"...or only the feeble twice-yearly payouts ?"

In the current financial year £5,000 of dividends can be received free of tax. On receipts greater than that you pay tax at either 7.5%, 32.5% or 38.5% depending on whether you pay tax at the basic rate, higher rate or additional rate.