Gift Hold-Over Relief 2026/27: CGT on Gifted Assets Explained
Giving away business assets or shares in a trading company can trigger a Capital Gains Tax bill even though no money changes hands. Gift Hold-Over Relief lets the donor defer that gain by passing it to the recipient. This guide explains which assets qualify, how the joint election works, and the long-term effect on both parties.
Updated 1 July 2026
Key Facts
Legislation:s165 TCGA 1992
Election deadline:4 years from end of tax year of gift
Personal company test:5% voting rights
CGT annual exempt amount 2026/27:£3,000
What Is Gift Hold-Over Relief?
Normally, gifting an asset is treated for CGT purposes as if it had been sold at market value, even though the donor receives nothing. This can create a "dry" tax charge — a CGT bill with no sale proceeds to pay it from. Gift Hold-Over Relief solves this for certain qualifying assets by allowing the donor and recipient to jointly elect to defer the gain: the donor pays no CGT at the point of the gift, and the recipient's base cost for their own future disposal is reduced by the amount of gain held over.
The relief does not cancel the tax — it defers it and shifts the liability point to whenever the recipient eventually makes a chargeable disposal, typically a sale.
Qualifying Assets
Assets used in a trade carried on by the donor, their personal company, or a trading partnership
Shares in the donor's personal trading company (at least 5% of voting rights)
Shares in any unquoted (unlisted) trading company, regardless of shareholding size
Agricultural property that qualifies for Agricultural Property Relief for Inheritance Tax purposes
Any asset given away where the transfer is immediately chargeable to Inheritance Tax, such as a gift into most trusts
Gifts of quoted shares in a listed company, buy-to-let investment property that is not part of a trade, and most personal possessions do not generally qualify unless one of these specific conditions is met.
Worked Example
Mark set up a small manufacturing business years ago and now wants to gift his shares in the trading company to his daughter Zoe. The shares originally cost Mark £20,000 and are now worth £220,000, giving a gain of £200,000. Without relief, Mark would face a large CGT bill despite receiving no cash from the gift.
Mark and Zoe jointly elect for hold-over relief. Mark pays no CGT now. Zoe's base cost for the shares becomes £20,000 (£220,000 market value minus the £200,000 held-over gain), rather than the £220,000 market value at the date of the gift.
If Zoe later sells the shares for £300,000, her taxable gain is calculated as £300,000 minus her £20,000 base cost — £280,000 — rather than just the £80,000 growth that occurred during her own period of ownership. The deferred gain has effectively been passed down to her.
Gifts Into Trust
Where an asset is transferred into most types of trust (commonly a discretionary trust), the transfer is immediately chargeable to Inheritance Tax as a Chargeable Lifetime Transfer, subject to the settlor's available nil-rate band. This immediate IHT chargeability is, in itself, enough to make the transfer eligible for CGT hold-over relief — the asset does not need to be a business asset in this scenario.
For gifts into trust, only the trustees need to make the hold-over election (a joint election with the settlor is not required in the same way as for outright gifts to individuals), though in practice the settlor and trustees usually coordinate the claim together with their advisers.
Interaction With Inheritance Tax
Hold-over relief only affects Capital Gains Tax. A lifetime gift of a qualifying business asset directly to an individual is usually a Potentially Exempt Transfer for Inheritance Tax purposes, meaning it drops out of the donor's estate only if they survive seven years. Business Property Relief or Agricultural Property Relief may separately reduce or remove any IHT charge on qualifying business or farming assets, but these are assessed entirely independently of the CGT hold-over claim, and the conditions for each relief should be checked separately before relying on both.
Common Pitfalls
Missing the joint election. Hold-over relief for gifts to individuals is not automatic — both parties must sign and submit the election within the time limit, or the gain crystallises immediately.
Forgetting the recipient inherits a lower base cost. The deferred gain becomes the recipient's problem eventually — this should be explained clearly before a family gift is made, as it affects their future tax bill on sale.
Overlooking the non-resident clawback rule. If the recipient emigrates and disposes of the asset within six tax years, the held-over gain can be clawed back from the original donor.
Frequently Asked Questions
What is Gift Hold-Over Relief?
Gift Hold-Over Relief (sometimes called gift relief, under section 165 of the Taxation of Chargeable Gains Act 1992) allows the donor of certain business assets or shares to defer the Capital Gains Tax that would otherwise arise on the gift. Instead of the donor paying CGT immediately on the increase in value, the gain is "held over" and effectively transferred to the recipient, who takes on a lower base cost for the asset for their own future CGT calculation when they eventually sell it.
What assets qualify for Hold-Over Relief?
The main qualifying categories are assets used in a trade carried on by the donor or their personal company, shares in an unlisted trading company, and shares in the donor's personal trading company where the donor holds at least 5% of the voting rights. Hold-over relief is also available on gifts that are immediately chargeable to Inheritance Tax, such as transfers into most types of trust, regardless of whether the asset is a business asset. Gifts of quoted shares in a listed company generally do not qualify unless the donor's personal company condition is met.
Do both the giver and the recipient need to agree to the relief?
Yes, for gifts of business assets to an individual (rather than into trust), both the donor and the recipient must jointly elect for hold-over relief on the correct HMRC form, normally within four years of the end of the tax year in which the gift was made. Without a valid joint election, the relief is not available and the donor is treated as making a disposal at market value for CGT purposes, potentially triggering an immediate tax bill.
Show 7 more questionsShow fewer questions
How does hold-over relief affect the recipient's future CGT bill?
The recipient inherits a reduced base cost for the asset, equal to its market value at the date of the gift minus the gain that was held over. This means that when the recipient eventually sells the asset, their own capital gain is calculated using this lower base cost, effectively rolling the donor's deferred gain into the recipient's eventual disposal. The tax is not cancelled — it is postponed and passed down the chain until a taxable disposal (a sale, rather than a further gift with hold-over) eventually happens.
Can hold-over relief be used when gifting a family business to children?
Yes, this is one of the most common uses of the relief. A parent gifting shares in the family trading company, or business assets used in a sole trader or partnership business, to a child can hold over the gain, meaning no CGT is due at the point of the gift. The child takes on the parent's original (lower) base cost, so their own CGT bill will be larger if and when they eventually sell — but the immediate cash-flow problem of paying CGT on a gift with no sale proceeds is avoided.
Does hold-over relief avoid Inheritance Tax as well as Capital Gains Tax?
No, hold-over relief is purely a Capital Gains Tax deferral and has no direct effect on Inheritance Tax. A lifetime gift to an individual is normally a Potentially Exempt Transfer for IHT purposes, meaning it falls outside the donor's estate only if they survive seven years from the date of the gift. Business Property Relief or Agricultural Property Relief may separately reduce or eliminate the IHT charge on qualifying business or agricultural assets, but this is assessed under entirely different rules from hold-over relief.
What happens if the recipient becomes non-UK resident after receiving a held-over gift?
Special anti-avoidance rules can claw back the held-over gain if the recipient becomes non-UK resident within six tax years of receiving the asset and disposes of it (or in some cases even without disposing of it) while non-resident, before the gain would otherwise have been taxed. In that situation, the gain that was held over can become chargeable on the original donor rather than the recipient. This rule is designed to stop CGT being avoided entirely by moving abroad after receiving a gift.
Can hold-over relief be claimed on a gift into a trust?
Yes. Gifts into most types of trust are immediately chargeable to Inheritance Tax (subject to the nil-rate band and any other reliefs), and this immediate chargeability is itself sufficient to allow hold-over relief for CGT purposes, without needing the asset to be a business asset. This means cash gifts into trust do not qualify (since there is no chargeable gain on cash), but gifts of shares, property or other chargeable assets into a discretionary trust commonly do.
Is there a minimum shareholding needed to hold over gains on unquoted shares?
For shares in the donor's personal trading company (a company where the donor holds at least 5% of the voting rights), hold-over relief is available on the gift of those shares. For shares in other unlisted (unquoted) trading companies where the donor does not meet the personal company test, gift relief can still apply because unquoted trading company shares are treated as qualifying assets in their own right under a separate limb of the relief, without needing to meet the 5% test.
What is the time limit for claiming Gift Hold-Over Relief?
A joint hold-over relief election must normally be made within four years from the end of the tax year in which the disposal (the gift) took place. For example, a gift made in the 2026/27 tax year would need the election submitted by 5 April 2031. Missing this deadline means the relief cannot be claimed, and the donor remains liable to CGT on the gain calculated as if the asset had been sold at market value on the date of the gift.
Disclaimer: This guide is for general information only and does not constitute personal financial or tax advice. Gift Hold-Over Relief involves detailed conditions and elections — always consult a qualified tax adviser before gifting business assets or shares.
