The three taxes that move when you make a gift
Gift Tax — paid by the recipient
It is devolved to the regions, so the difference between them is enormous: several give relief of up to 99 % between parents and children while others give none at all. Form 651, within 30 working days of the gift.
Income tax — paid by the giver
If the asset has risen in value, the giver is taxed on the capital gain as though they had sold it, even though they receive nothing. This is the tax people forget, and the one that normally decides whether giving makes sense.
Municipal capital gains tax — paid by the giver
Only for urban property. It is paid to the council where the property is located, within 30 working days, and is calculated on the increase in land value.
The comparison that actually matters
On inheritance, the capital gain accrued by the deceased is never taxed — what we call in the office "the dead man's gain". On a gift, it is. That is why giving away a heavily appreciated property usually costs more than leaving it in a will, even in regions where Gift Tax carries 99 % relief: what you save on one side, the giver pays in income tax on the other.
Giving tends to win when one of these applies:
- It is cash: there is no capital gain to tax in the giver.
- The asset has not risen in value or has fallen since it was acquired.
- The giver is over 65 and gives away their main home: the capital gain is exempt from their income tax.
- There is a genuine need now — a deposit on a home, starting a business, a family situation — and the tax cost is the price of solving it in time.
- The aim is to put your affairs in order while alive to avoid a dispute between heirs later.
Deadlines and forms, at a glance
The formal requirements that wipe out the tax advantage
Regional reliefs do not apply themselves: they are lost to formal defects with surprising ease.
- A public deed whenever property is gifted, and in many regions also to qualify for relief on cash gifts.
- Evidence the origin of the funds and make the transfer by traceable bank payment. An envelope of cash destroys the relief.
- File form 651 on time even if the amount due is zero. Relief reduces the sum, not the duty to declare.
- Meet the residence requirements of the recipient in the relevant region, normally for the previous five years.
Before you sign, do the full sum
The useful calculation is not "how much is Gift Tax": it is adding that tax, the giver's income tax and the municipal capital gains tax, then comparing the total against what the same transfer would cost through inheritance. With the acquisition value, the current value and the region of residence, it takes an afternoon.
Ask me for the calculation