Gifting shares to family members in the UK has three main tax implications: capital gains tax (CGT), inheritance tax (IHT), and stamp duty. Transfers to a spouse or civil partner are generally tax-free. But gifts to children or other family members are treated as a sale at market value for CGT purposes and as a potentially exempt transfer for IHT. If you die within seven years of making the gift, inheritance tax may apply. Gift holdover relief can defer CGT on qualifying business shares, and Business Property Relief may reduce or eliminate IHT if conditions are met. Stamp duty does not apply to share gifts.
This article examines the tax implications of gifting shares to family members, including exemptions for spousal transfers, relief conditions for business shares, and practical considerations for timing and claiming tax reliefs.
Gifting Shares to Spouse or Civil Partner
When shares are given to a spouse or a civil partner, the transfer is deemed a ‘no gain, no loss’ transaction. Therefore, transfers between spouses and civil partners will not result in any capital gains tax. The ‘no gain no loss’ rule ceases to apply if the spouses separated and did not live together at all in the tax year in which the transfer occurred.
However, when the receiving spouse later sells the shares, they will be liable for capital gains tax on any profit made. The taxable gain is calculated as the difference between the original purchase price of the shares and the proceeds from their sale.
Example:
Cris gave shares worth £100,000 to his wife Georgina in 2018. The shares were originally bought for £75,000. Georgina sells the shares in 2025/26 for £150,000. Both are higher‑rate taxpayers, and neither has other disposals.
Since the gift to Georgina was between spouses, it was no gain/no loss transfer at the time, so no CGT was due in 2018. When Georgina sells in 2025/26, CGT is calculated as follows:
Particulars | Amount (£) |
|---|---|
Sales proceeds from the disposal of shares | 150,000 |
Less: Original cost of the shares | (75,000) |
Capital gain | 75,000 |
Less: Annual exempt amount | (3,000) |
Chargeable gain | 72,000 |
Capital gains tax: [at 24% higher rate for 2025/26] | £17,280 |
Thus, the capital gains tax due would be £17,280.
Capital Gains Tax on Gifts to Family Members
When shares are sold to connected persons, such as family members, the transaction is considered to occur at market value, regardless of the actual amount paid. Therefore, gifting shares to family members does not make the transaction exempt from capital gains tax. However, provided that certain conditions are met, the immediate capital gains tax that would otherwise have been paid, can be avoided. The relief is known as the gift holdover relief.
What is Gift Holdover Relief?
Gift-holdover relief, as the name suggests, is the relief where the capital gains tax on the transfer of assets will not attract any capital gains tax on the initial gift transfer. Instead, the recipient of the gift pays the capital gains tax when they subsequently sell (or dispose of) them. The relief is subject to specific conditions and is only applicable to certain companies.
Conditions for the relief
The following conditions must be met to be eligible for the gift holdover relief.
- The shares must be in a company that is not listed on a recognised stock exchange.
- The company should not be the personal company of an individual giving the gifts.
- The company must be a trading company (or the holding company of a trading group). Shares in companies mostly engaged in non-trading activities generally do not qualify for this relief.
It’s important to note that where the transferee is a company, the gift holdover relief is not applicable to such transactions.
Example: Calculating Gift Holdover Relief
Paul gives shares in a qualifying trading company worth £50,000 to his brother John as a gift. Paul originally bought the shares for £17,000, meaning the potential gain on that disposal would have been £33,000. Because both Paul and John jointly claim Gift Hold‑Over Relief, Paul does not pay CGT on this gain at the time of the gift ,the gain is held over.
John’s base cost for CGT purposes is reduced by the held over gain (£33,000), giving him a revised cost basis of £17,000
Suppose John later sells the shares for £100,000 and he is a higher‑rate taxpayer. His CGT liability in the 2025/26 tax year would be calculated as follows:
Particulars | Amount (£) |
|---|---|
Sales proceeds from the disposal of shares | 100,000 |
Less: revised base cost of the shares | (17,000) |
Capital gain | 83,000 |
Less: Annual exempt amount | (3,000) |
Chargeable gain | 80,000 |
Capital gains tax: [at 24% higher rate for 2025/26] | £19,200 |
Therefore, John pays £19,200 in capital gains tax due to the gift holdover relief.
How to Claim Gift Holdover Relief
To claim gift holdover relief, both the person giving the shares and the recipient must jointly make the claim. The holdover relief claim form HS295 should be completed and attached to the self-assessment tax return to ensure a successful claim. The claim must be made within four years from the end of the tax year in which the gift was made.
Anti-Avoidance Rules for Share Gifts
HMRC's settlements legislation may apply if shares are gifted to divert income to family members in lower tax brackets, particularly with alphabet shares or dividend waivers that allow selective income distributions. If the rules apply, income remains taxable on the original shareholder, not the recipient. Seek professional tax advice before implementing such arrangements.
Inheritance Tax on Gifting Shares to Family members
When you gift shares to family members other than your spouse or civil partner, the transfer is treated as a potentially exempt transfer (PET) for inheritance tax purposes. Gifts to your spouse or civil partner are exempt from inheritance tax entirely, regardless of value or timing.For gifts to children or other family members, if you survive seven years from the date of the gift, no inheritance tax is due. However, if you die within seven years, the gift may be added back to your estate and subject to inheritance tax at 40%, unless Business Property Relief is available.
Annual Exemptions and Allowances
You can reduce inheritance tax exposure by using available allowances:
- Annual exemption: £3,000 per tax year can be gifted without inheritance tax implications. Unused allowances can be carried forward one year, allowing up to £6,000 in a single year.
- Small gifts: Up to £250 per person per year to as many people as you wish (cannot be combined with other allowances for the same person).
- Wedding gifts: £5,000 to a child, £2,500 to a grandchild, or £1,000 to others.
Business Property Relief: April 2026 Changes
Business Property Relief (BPR) can reduce or eliminate inheritance tax on qualifying business assets, including shares in trading companies. From 6 April 2026, BPR rules changed significantly. Qualifying business assets now receive 100% relief only on the first £2.5 million of combined agricultural and business property value. Any value above this threshold receives 50% relief, resulting in an effective inheritance tax rate of 20% on the excess.Conditions for Business Property Relief
For shares to qualify for BPR, the following conditions must be met:
- The company must be a trading company, meaning its main activities are trading (such as providing goods or services) rather than non-trading activities like holding investments or property letting.
- The shares must have been held for at least two years at the date of death or gift.
- The recipient must still hold the shares when the donor dies (if death occurs within seven years of the gift).
Example: Calculating Business Property Relief
Sarah gifts shares in her family property company worth £4 million to her daughter in January 2022. Sarah originally bought the shares for £1 million. The shares qualify as unlisted shares in a trading company.
Sarah and her daughter jointly claim gift holdover relief, so no CGT is due at the time of the gift. However, Sarah dies in May 2026, four years and four months after the gift.
For inheritance tax purposes:
Particulars | Calculation | Amount |
|---|---|---|
First £2.5 million of share value | 100% BPR | £0 IHT |
Remaining £1.5 million | 50% BPR | £750,000 taxable |
Inheritance tax | 24% × £750,000 | £180,000 IHT |
As the gift was made between four and five years before death, taper relief reduces the inheritance tax rate to 24%.
Conclusion
The April 2026 Business Property Relief changes have fundamentally altered inheritance tax planning for family businesses, making early action and proper structuring more important than ever. While gift holdover relief remains a valuable tool for deferring capital gains tax, the interplay between CGT, inheritance tax, and company law requirements means that share gifting decisions now carry greater long-term consequences for both donors and recipients. Understanding valuation obligations, claim deadlines, and residency rules can prevent unexpected tax charges years after a gift is made.
Professional advice from qualified tax adviser ensures you navigate these complexities correctly, claim all available reliefs, and structure share transfers in a way that protects your family's wealth across generations.
FAQs
No, the no gain no loss rule applies only to legally married spouses and civil partners. If you gift shares to an unmarried partner, even after years of living together, the transfer is treated as a disposal at market value for CGT purposes. You may face a CGT charge on the gain even though you received no money. However, gift holdover relief may be available if the shares meet the qualifying conditions explained in this article, allowing you to defer the CGT until your partner sells the shares.
If the recipient of shares that have benefited from gift holdover relief becomes non-UK resident for tax purposes within six years of receiving the gift and still holds the shares, the held-over gain becomes immediately chargeable. HMRC can claw back the deferred capital gains tax and pursue the original donor for payment if the recipient does not pay.
If the recipient is an employee, HMRC may treat the gift as employment‑related, triggering income tax and NICs unless it can be shown that the transfer was genuinely a personal or family gift, not remuneration.
When gifting shares to connected persons such as family members, you must use the market value at the date of the gift. The price a willing buyer and seller would agree to with full knowledge of the facts. For unlisted private company shares, this typically requires a formal valuation from a qualified accountant or valuation specialist. You can submit form CG34 to HMRC to agree the valuation in advance, which avoids disputes later.
Yes. Many private companies include pre-emption rights, age restrictions, or transfer consent requirements in their articles of association or shareholders' agreements. If restrictions exist, existing shareholders may have first refusal rights before you can gift shares to family members.
Gifting shares directly transfers ownership immediately, exposing them to the recipient's creditors, divorce settlements, or bankruptcy. A trust maintains control, you can specify when and how children receive shares, protect assets from divorce, and retain trustee oversight. Trusts trigger different inheritance tax rules and are used by many for protecting family businesses across generations.
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