Gift Hold-Over Relief Explained: Gifting Business Assets and Shares

On a gift, capital gains tax treats the donor as having disposed of the asset at its market value. Where hold-over relief is claimed, the donor pays no tax on the held-over gain. The recipient's base cost for the asset is reduced by the same amount instead, so the gain passes to the recipient and becomes chargeable when they sell or otherwise dispose of the asset.

For 2026/27, capital gains tax is charged at 18% and 24% for individuals and at 24% for trustees, with an annual exempt amount of £3,000 for individuals, as our article on capital gains tax explains. HMRC's helpsheet HS295 sets out the rules in full.

The first form of the relief covers gifts of business assets. HMRC's Capital Gains Manual describes three main categories. The first is assets used in a trade, profession or vocation carried on by the donor, by the donor's personal company or by a member of a trading group. The second is shares or securities in a trading company that is either unlisted or the donor's personal company, broadly one in which the donor holds at least 5% of the voting rights. The third is agricultural property, where the conditions for agricultural property relief are met.

This is why the relief features so often in the succession of family businesses. The same shares may also qualify for an inheritance tax relief, which our article on Business Relief explains.

The second form applies where a gift is a chargeable transfer for inheritance tax rather than a potentially exempt transfer. The most common example is a gift into a discretionary trust. HMRC confirms that the relief is available even where no inheritance tax is actually payable on the gift, for instance because it falls within the nil-rate band of £325,000.

Because this form is not restricted to business assets, it can apply to gifts of investment portfolios or property into trust, although qualifying corporate bonds are excluded. Where a gift into trust exceeds the nil-rate band, inheritance tax is charged at 20% if the trustees pay it. Our article on discretionary trusts explains how these trusts are taxed.

Several restrictions limit the relief. Where the donor held 25% or more of the voting rights, or the company is their personal company, relief on a gift of shares is reduced in proportion to the company's non-business chargeable assets. A company that holds a substantial investment portfolio alongside its trade can therefore receive only partial relief.

The recipient must generally be UK resident, except where the asset is an interest in UK land. No relief is available for a gift into a settlor-interested trust, meaning a trust from which the settlor, their spouse or civil partner, or their minor children can benefit. It is also worth being clear about what the relief does. It defers the gain rather than removing it, so if the recipient sells the asset soon afterwards, tax is charged on the full held-over gain at that point.

The claim is normally made jointly by the donor and the recipient. Where the recipient is the trustees of a trust, the donor makes the claim alone. HMRC's guidance states that the claim must be made within four years from the end of the tax year in which the gift was made, using the claim form that accompanies helpsheet HS295.

Hold-over relief deals only with capital gains tax on the gift. The inheritance tax position is decided separately, according to whether the gift is a potentially exempt transfer, a chargeable lifetime transfer or covered by a relief. A potentially exempt transfer falls outside the donor's estate if they survive seven years, as our article on the seven-year rule explains.

Because the two taxes interact, gifts of this kind are usually made with specialist tax advice and, where they form part of wider planning, regulated financial advice.