If I gift small interests in my rental property to each of my three children and the property is subsequently sold, would their annual capital gains tax (CGT) exemptions be set against any profit made? For example, a CGT annual exemption (AE) of £12,300 each plus my wife’s and my own AEs would total £61,500. I would continue to be in receipt of 100% of the rental income. 

Arthur Weller replies:  

Any gift from you to your children would be treated, for CGT purposes, as a disposal at market value. So, you would use up your AEs (currently £12,300) when transferring to them, and any capital gain above the £12,300 would be taxable on you. Transferring to your wife would not use up any of your AE and not trigger any CGT for you. If you waited until the next tax year to sell, you are correct; you would be able to set five AE's against the capital gain on the sale. But since CGT is payable on your transfer to the children, it may not be worth your while doing so.