What is gift hold-over relief and how does it work?

Full answer

Normally, giving away an asset counts as a disposal at market value for Capital Gains Tax, so you could owe CGT even though you received no cash. Gift hold-over relief defers that charge. Instead of you paying tax on the gain at the date of the gift, the gain is deducted from the recipient's acquisition cost, so they take on your original base cost. CGT is only paid when they eventually dispose of the asset, calculated on the combined gain. Relief is not automatic - the donor and recipient must usually make a joint claim to HMRC (a sole claim applies for gifts into certain trusts). It only covers qualifying assets: assets used in your trade, unlisted shares in trading companies, shares in your personal trading company (broadly where you hold 5% or more of voting rights), and certain agricultural property. Gifts of ordinary investment assets such as a second home or a share portfolio do not qualify. Worked example: you give qualifying business shares with a base cost of GBP 20,000 and a market value of GBP 80,000 to your son. The GBP 60,000 gain would normally be taxable. With hold-over relief, you pay nothing now; your son's base cost becomes GBP 20,000. If he later sells for GBP 100,000, his gain is GBP 80,000, taxed at 18% or 24% for 2026/27 depending on his band, after the GBP 3,000 annual exempt amount. This affects family business succession and lifetime gifting strategies, and it often interacts with Inheritance Tax planning since a gift can also be a potentially exempt transfer. Use the capital gains tax calculator to model the recipient's eventual liability, and the inheritance tax calculator for the IHT side.

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