Gift Hold-Over Relief Explained: A 2026/27 UK Guide

Quick answer

Gift Hold-Over Relief lets you give away certain assets - chiefly qualifying business assets, unlisted trading shares, and gifts into trust - without paying Capital Gains Tax when you make the gift. The gain is "held over" and passed to the recipient, who takes on your original base cost and pays the deferred tax only if they later sell. It is a deferral, claimed jointly on form HS295.

What Gift Hold-Over Relief actually does

When you give an asset away, HMRC treats the gift as a disposal at market value, even though no money changes hands. That can create a chargeable gain and a Capital Gains Tax bill, despite you receiving nothing in cash. Gift Hold-Over Relief removes that immediate charge for qualifying gifts.

The mechanism is simple in principle. The donor's gain is reduced to nil at the date of the gift. The same amount is then deducted from the recipient's acquisition cost. So if you bought an asset for GBP 50,000 and it is worth GBP 200,000 when you gift it, the GBP 150,000 gain is held over. The recipient is treated as having acquired the asset for GBP 50,000 rather than GBP 200,000. When they sell, their gain is measured from that lower figure, so the deferred tax effectively crystallises on them.

Who and what qualifies

There are two broad routes into the relief, and they have different rules.

Route one: business assets

This covers gifts of:

• Assets used in a trade carried on by you, your personal company, or a partnership you are a member of.
• Shares or securities in unlisted trading companies.
• Shares in your personal trading company, where you hold at least 5 percent of the voting rights.
• Certain agricultural property.

The key theme is that the relief is designed to help genuine trading businesses pass to the next generation or to new owners without a dry tax charge. Investment assets - a buy-to-let flat, a share portfolio of listed companies, a holiday home - do not qualify under this route.

Route two: gifts immediately chargeable to Inheritance Tax

The second route is wider in terms of asset type but narrower in terms of structure. A gift that is immediately chargeable to Inheritance Tax - most commonly a transfer into a discretionary trust - can qualify for hold-over relief even if the asset is not a business asset. This is why hold-over relief and trust planning are so often discussed together.

How to claim

You make the claim using HMRC helpsheet HS295, which includes a claim form.

The deadline is four years from the end of the tax year in which the gift was made. For a gift made in 2026/27, that means by 5 April 2031.

Worked example

Aisha owns 100 percent of an unlisted trading company she started years ago. She gifts the whole shareholding to her daughter, Priya, who runs the business with her. The shares cost Aisha GBP 20,000 and are worth GBP 320,000 at the date of the gift.

Without any relief, Aisha faces CGT on a GBP 300,000 gain. After the GBP 3,000 Annual Exempt Amount, the taxable gain is GBP 297,000. If Aisha is a higher-rate taxpayer, the standard CGT rate of 24 percent would produce a substantial bill - and she has received no cash to pay it.

With Gift Hold-Over Relief, that GBP 300,000 gain is held over. Aisha pays nothing now. Priya's base cost becomes GBP 20,000 rather than GBP 320,000. If Priya later sells for GBP 400,000, her gain is measured from GBP 20,000, so the deferred GBP 300,000 resurfaces alongside her own GBP 80,000 of growth.

Note that Business Asset Disposal Relief, taxed at 18 percent for 2026/27, applies to qualifying sales rather than gifts that are held over. If Priya might one day qualify for it on a sale, that can shape whether holding over is the best long-term plan. Model both outcomes before deciding.

Sales at an undervalue

You do not have to give an asset away for free to use the relief. If you sell a qualifying asset to a connected person - a close relative, for instance - for less than it is worth, the transaction is treated as taking place at market value for CGT.

In that situation, part of the gain can still be held over. The held-over amount is broadly the market-value gain minus any excess of the actual proceeds over your original cost. In plain terms, if you take some cash out, the portion that represents real profit to you may still be taxable, while the rest can be deferred.

Where the relief is denied or clawed back

Hold-over relief is not unconditional. Watch for these traps:

• Non-resident recipients. The relief is generally refused if the person receiving the asset is not UK resident, because HMRC could lose the ability to tax the deferred gain.
• Emigration within six years. If the recipient becomes non-resident within six years of the end of the tax year of the gift, the held-over gain can be charged on them.
• Settlor-interested trusts. Hold-over relief is restricted where the donor, their spouse or civil partner, or their minor children can benefit from the trust receiving the gift.
• Non-business assets in a company. When you gift shares in a company that holds significant non-trading assets, the relief can be restricted to the trading proportion.

Hold-over relief and Inheritance Tax

Gift Hold-Over Relief deals only with Capital Gains Tax. Inheritance Tax (IHT) is a completely separate question, and the same gift can trigger both sets of rules.

Most outright gifts to individuals are Potentially Exempt Transfers. They fall outside your estate for IHT if you survive seven years from the date of the gift. Gifts into most trusts are immediately chargeable to IHT, which - usefully - is exactly the kind of gift that opens the door to hold-over relief under route two.

For 2026/27, the IHT nil-rate band is GBP 325,000 and the residence nil-rate band is GBP 175,000, with a 40 percent rate above the available allowances (36 percent where at least 10 percent of the net estate passes to charity). Business assets may also attract separate IHT reliefs, which is another reason gifting business interests can be tax-efficient overall. To sketch the IHT side of a gift, use a dedicated estate tool.

Should you use it? A short checklist

Hold-over relief tends to make sense when:

• You hold a genuine trading business or unlisted trading shares you want to pass on.
• You cannot - or do not want to - pay CGT on a gift that produces no cash.
• The recipient is UK resident and likely to remain so.
• You are comfortable that the deferred gain may produce a larger bill for the recipient later.

It tends not to fit when the asset is an investment property or listed portfolio, when the recipient may emigrate, or when an outright disposal qualifying for Business Asset Disposal Relief at 18 percent would actually leave the family better off. As ever with You and Your Money decisions, run the numbers first.

The bottom line

Gift Hold-Over Relief is a powerful but precise tool. It lets qualifying business assets, unlisted trading shares, and gifts into trust pass on without an immediate Capital Gains Tax charge - but it shifts the deferred gain onto the recipient and comes with strict conditions on residence, trusts, and asset type. Because it is You and Your Money, YMYL territory, model the gain, weigh the Inheritance Tax angle, and take advice before you sign HS295.