‘I bought paper shares for my children – will I be taxed if I transfer them?’

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Investing in income-earning utilities can be a smart financial move, especially if you have been holding onto shares for a long time. One reader, Tim, shared his concerns about transferring shares designated for his children and the potential tax implications involved.

Tax expert Anna Warren from Bentley Reid provided valuable insights into the situation. It appears that Tim holds designated accounts for his children, which are essentially held by him on behalf of his children. These accounts may be revocable, meaning he has control over the shares and can access them at any time, or irrevocable, creating a trust in favor of each child.

With the phase-out of paper share certificates in the UK, it is recommended to consult a financial adviser or stockbroker to assist in transferring ownership online and determine the type of account Tim has for his children.

When it comes to the tax treatment of the shares, there are three main considerations. Income tax applies to the dividends received, with varying rates depending on the taxpayer’s income level. Capital gains tax (CGT) would apply if Tim sells or gifts the shares to his children, with specific rates and exemptions to consider. Inheritance tax (IHT) may also come into play on death or gifts made within seven years prior.

If Tim has a revocable account, he remains the owner of the shares and would be subject to CGT if he decides to gift them to his children. However, if the accounts are irrevocable, the transfer to his children would not have CGT or IHT implications for him.

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Understanding the tax implications of transferring shares to children is crucial for proper financial planning. Seeking professional advice and staying informed on tax regulations can help navigate these complexities effectively.

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bought, children, paper, shares, taxed, transfer

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