Gifting Shares to Family Members: Capital Gains Tax, Holdover Relief and Family Succession Planning Home Blogs Gifting Shares to Family Members: Capital Gains Tax, Holdover Relief and Family Succession Planning Table of Contents Share This Post in Social media Gifting Shares to Family Members: How to Avoid Unexpected Capital Gains Tax Passing a family business to the next generation should be an opportunity to protect everything you have built. However, gifting shares to children or other family members can create a substantial Capital Gains Tax (CGT) liability, even where no money changes hands.  For business owners approaching retirement, the challenge is particularly significant. You may want your children to take ownership of the company while retaining sufficient funds for your own financial security. At the same time, changes to Inheritance Tax (IHT) Business Property Relief from 6 April 2026 have made succession planning more complex.  The good news is that Gift Holdover Relief can defer Capital Gains Tax on qualifying transfers of business shares. However, the relief is subject to important restrictions, particularly where a company owns investment properties or other non-trading assets.  Understanding these rules before transferring shares can prevent expensive tax consequences. Does Gifting Shares to Family Members Trigger Capital Gains Tax? Yes. Under UK tax law, gifting shares to family members is generally treated as a disposal at market value, even if the recipient pays nothing.  Sections 17 and 18 of the Taxation of Chargeable Gains Act 1992 broadly require connected-person transactions to be assessed using market value rather than the amount actually received.  For example, suppose you own shares worth £1 million that originally cost £100,000. If you gift those shares to your adult child, HMRC would generally calculate your capital gain as £900,000.  Assuming the entire gain is taxable at the higher CGT rate of 24%, the potential liability could be £216,000 before applying any available exemptions or reliefs.  The difficulty is obvious: you could face a substantial tax bill without receiving any sale proceeds to pay it.  This is why gifting company shares without considering CGT holdover relief can be a costly mistake. What Is Gift Holdover Relief? Gift Holdover Relief allows the Capital Gains Tax arising on certain gifts of business assets, including qualifying company shares, to be deferred rather than paid immediately.  Under Section 165 TCGA 1992, qualifying gains can be transferred to the recipient by reducing their acquisition cost for CGT purposes.  In practical terms:  The person gifting the shares may avoid paying CGT immediately on the eligible gain.  The recipient inherits a reduced CGT base cost.  The deferred gain is generally brought into account when the recipient subsequently disposes of the shares.  For example, if shares worth £500,000 originally cost £50,000, the £450,000 gain could potentially be held over in full.  The recipient would then acquire the shares with a CGT base cost of £50,000 rather than their £500,000 market value.  Importantly, holdover relief postpones the tax liability; it does not permanently eliminate the underlying gain.  When Can You Claim Holdover Relief on Gifted Company Shares? Section 165 holdover relief is available for qualifying business assets and certain company shares.  For share transfers, qualifying assets include shares in:  An unquoted trading company.  An unquoted holding company of a trading group.  A trading company that qualifies as the donor’s personal company, subject to the statutory conditions.  For these purposes, a personal company generally requires the donor to hold at least 5% of the voting rights. These rules should not be confused with the separate, more extensive conditions for Business Asset Disposal Relief.  Other restrictions can apply, including rules concerning the recipient’s tax residence and certain trust arrangements. 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The donor and recipient must normally make a joint claim using HMRC’s holdover relief claim form accompanying Helpsheet HS295.  Where the gift is made to trustees of a settlement, the donor generally claims alone.  The claim normally must be submitted within four years after the end of the tax year in which the disposal occurs.  An accurate share valuation, supporting CGT computation and properly documented transfer are important, particularly where the shares are not publicly traded.  HMRC also permits qualifying taxpayers to request deferred agreement of valuations in appropriate circumstances.  Why Investment Properties Can Restrict Holdover Relief One of the most frequently overlooked problems when gifting shares to family members is the presence of investment assets within the company.  Although a company may be predominantly trading, it might also own:  Residential or commercial investment properties.  Land held for investment rather than trading purposes.  Investment portfolios.  Other non-business assets.  Under Schedule 7, paragraph 7 of TCGA 1992, the amount of holdover relief can be restricted where the company owns chargeable non-business assets and the donor meets the relevant ownership conditions.  The restriction applies where, at any point during the 12 months preceding the disposal, the donor either held at least 25% of the company’s voting rights or, if an individual, the company was