Should you decide to make a gift to your loved ones which has risen in value between the date you bought it and the date of the gift (which is unlikely if you are a serial late Christmas Eve shopper) then, technically, a capital gain will have arisen and you could have to account to HM Revenue and Customs for a gain on which tax may be payable.
When you make a gift you are deemed to have ‘sold’ that item to the recipient at its current market value, even though you have not received any money for it. The exception to this is a gift to your spouse or registered civil partner who will be deemed to have 'purchased' the item at the price you paid for it in the first instance, so no loss no gain.
Before you squirrel away from the tax man the grotesque, but valuable, gold chess and draughts set destined for your favourite nephew, each of us has an annual allowance of gains we are allowed to make without having to pay tax. In this tax year it is £10,100 for each individual. Furthermore, the market value at the time of the gift must be in excess of £6,000. Any gains in excess of these will be taxable at a flat rate of 18%.
There is a serious point here in that the rate of capital gains tax is generous when compared to the higher rate of income tax, currently 40% and soon to be 50% for top level earners. Curiously, despite raising income tax in the Pre-Budget Report the Chancellor did not raise the rate of capital gains tax. Given this disparity in the different rates it is becoming increasingly common for people to engineer various, perfectly legal, methods of treating their income as a capital gain and therefore pay tax at a rate of 18%. It is, therefore, hardly surprising that many commentators believe that this loophole will not be around for ever and the most effective way of closing it is to raise the rate of capital gains tax.
With this in mind it may be worth making any large gifts that you are planning sooner rather than later.