Gift Hold Over Relief: how Capital Gains Tax Hold-Over Relief works in 2026/27
Gift Hold Over Relief allows individuals to defer Capital Gains Tax (CGT) when they give away certain qualifying assets or sell assets below their market value to help the recipient. Instead of paying CGT immediately on the gain, the gain is transferred to the recipient and becomes payable when they later dispose of the asset.
This relief can be particularly valuable when transferring business assets, shares in qualifying companies or other assets where an immediate Capital Gains Tax charge would create a financial burden. Any gain eventually crystallising is charged within the wider Income Tax and CGT framework explained in our ultimate guide to personal tax in the UK. However, strict conditions apply, and not every gift or transfer qualifies.
Understanding the Gift Hold-Over Relief rules before transferring an asset is essential. The relief must be claimed jointly by the person making the gift and the recipient, and both parties must understand how the held-over gain affects future tax calculations.
This guide explains how Capital Gains Tax Gift Hold-Over Relief works, who can qualify, which assets may be eligible and how to make a successful claim.
What is Gift Hold Over Relief?
Gift Hold Over Relief, also known as Hold-Over Relief, is a Capital Gains Tax relief that allows the person giving away a qualifying asset to postpone the tax charge on the gain.
Normally, giving away an asset is treated as a disposal for Capital Gains Tax purposes. Even though no money may be received, HMRC generally treats the transfer as taking place at market value, which can create a taxable gain.
Where Gift Hold Over Relief applies, the gain is deferred instead of being taxed immediately.
The held-over gain reduces the recipient’s acquisition cost of the asset. When the recipient later sells or disposes of the asset, their taxable gain is increased because the original gain is effectively carried forward.
The relief therefore delays the Capital Gains Tax liability rather than removing it completely.
How Gift Hold Over Relief works
Without relief, a gift of an asset may create an immediate Capital Gains Tax charge for the person making the gift.
With Capital Gains Tax Gift Hold-Over Relief:
- The original owner transfers a qualifying asset.
- A capital gain is calculated on the disposal.
- The gain is held over instead of being taxed immediately.
- The recipient’s acquisition cost is reduced by the held-over amount.
- The recipient pays Capital Gains Tax when they eventually dispose of the asset.
This allows assets to be transferred without creating an immediate tax liability, while ensuring the gain is preserved for future tax purposes. This is distinct from CGT Rollover Relief, which defers a gain by reinvesting sale proceeds into a replacement asset rather than gifting the original asset away.
Gift Hold-Over Relief eligibility
Gift Hold-Over Relief eligibility depends on the type of asset being transferred and the circumstances of both the person giving the asset and the recipient.
In general, the relief may be available where:
- A qualifying business asset is transferred.
- The asset is gifted or sold below market value.
- The relevant statutory conditions are satisfied.
- A joint claim is made by both parties.
The relief is commonly used where business owners want to transfer assets as part of succession planning, family arrangements or restructuring.
However, gifts between individuals do not automatically qualify. The nature of the asset and how it has been used must be reviewed carefully.
Which assets qualify for Gift Hold Over Relief?
The main types of assets that may qualify include certain business assets and qualifying shares.
Examples can include:
- Assets used in a trading business.
- Assets used by a sole trader or partnership.
- Shares in certain qualifying companies.
- Assets transferred as part of a business succession arrangement.
Assets held purely as investments will not normally qualify for Gift Hold Over Relief.
For example, investment property, shares held as a personal investment portfolio or other non-business assets may fall outside the relief rules unless specific conditions apply. Where a business asset is being replaced rather than gifted, claiming Business Asset Rollover Relief may be the more relevant option to review instead.
Gift Hold-Over Relief rules for business assets
Where business assets are being transferred, the person making the gift must usually satisfy specific conditions.
You may qualify where you:
The asset must generally be used for trading purposes rather than investment activities.
Examples of potentially qualifying business assets may include:
- Land and buildings used by the business.
- Plant and machinery.
- Business equipment.
- Other assets used in the trade.
If an asset has only been partly used for business purposes, partial relief may be available depending on the circumstances.
Gift Hold-Over Relief rules for company shares
Shares can qualify for Hold-Over Relief where they meet the relevant conditions.
For shares to qualify, they generally must be:
- Shares in an unlisted company; or
- Shares in the individual’s personal company.
Where shares are held in a personal company, the shareholder will generally need to satisfy ownership and voting requirements.
The company’s main activities must also be trading activities rather than investment activities.
For example, shares in a company providing goods or services may qualify, while shares in a company whose main activity is holding investments may not.
Reviewing the company’s activities before transferring shares is important because a change in the nature of the business could affect whether relief is available. Where a sole trader is instead transferring an entire business into a new company, incorporation relief follows a separate set of rules altogether.
Gifts below market value and Gift Hold Over Relief
Gift Hold Over Relief can also apply where an asset is sold for less than its market value to benefit the recipient.
For Capital Gains Tax purposes, transfers made at an undervalue are generally treated as taking place at market value. This means the person transferring the asset may still be treated as making a disposal based on the asset’s true value rather than the amount actually received.
Where the relevant conditions are satisfied, Hold-Over Relief allows the gain to be deferred and passed to the recipient through a reduced acquisition cost.
This can be useful where a business owner wants to help a family member or successor take over an asset without creating an immediate Capital Gains Tax charge.
Partial Gift Hold Over Relief
In some situations, only part of an asset may qualify for relief.
Partial Capital Gains Tax Gift Hold-Over Relief may apply where:
- An asset has been used partly for business purposes.
- Only part of the transfer meets the qualifying conditions.
- The recipient does not receive the entire qualifying interest.
For example, if a property has been used partly for a trading business and partly for private purposes, relief may only apply to the business-use proportion.
The gain relating to the non-qualifying element may remain immediately chargeable, while the qualifying element can be held over.
Calculating partial relief correctly is important because an incorrect claim could result in either an unexpected Capital Gains Tax liability or a claim being challenged by HMRC.
How the held-over gain is calculated
The purpose of Hold-Over Relief is to transfer the tax liability from the person making the gift to the recipient.
The broad calculation works as follows:
- The market value of the asset is established.
- The original owner’s capital gain is calculated.
- The eligible gain is held over.
- The recipient’s acquisition cost is reduced by the held-over amount.
The recipient therefore takes the asset with a lower base cost than its market value at the date of transfer.
When the recipient later sells the asset, their Capital Gains Tax calculation will normally include the deferred gain.
Worked example: Capital Gains Tax Gift Hold-Over Relief
David owns shares in an unlisted trading company that are worth £500,000. He originally acquired the shares for £100,000.
If David gives the shares to his daughter, the transfer is treated as taking place at market value for Capital Gains Tax purposes.
The initial gain would be:
- Market value at transfer: £500,000.
- Original cost: £100,000.
- Potential capital gain: £400,000.
David and his daughter make a valid Gift Hold Over Relief claim.
The £400,000 gain is deferred, meaning David does not pay Capital Gains Tax immediately.
Instead, his daughter’s acquisition cost is reduced by the held-over gain. If she later sells the shares, the deferred gain will be reflected in her Capital Gains Tax calculation.
This allows the ownership transfer to take place without creating an immediate tax payment for David.
How to claim Gift Hold Over Relief
A claim for Gift Hold Over Relief must normally be made jointly by:
- The person giving away the asset; and
- The person receiving the asset.
Both parties must agree that the relief should apply because the held-over gain affects the recipient’s future Capital Gains Tax position.
The claim should include details such as:
- The asset being transferred.
- The date of the transfer.
- The value of the asset.
- The amount of gain being held over.
- Confirmation that the qualifying conditions are satisfied.
Supporting evidence should be retained, including valuation documents, share information, business records and details showing how the asset was used.
When Gift Hold Over Relief does not apply
Not every gift qualifies for relief.
Common situations where Hold-Over Relief may not be available include:
- The asset is an investment asset rather than a qualifying business asset.
- The company shares do not meet the trading company requirements.
- The transferor does not meet the ownership conditions.
- The asset has not been used for qualifying business purposes.
- A valid joint claim is not submitted.
Gifts between spouses and civil partners are normally treated separately and usually take place on a no gain/no loss basis, meaning Gift Hold Over Relief is generally not required. The position can differ where a marriage or partnership is ending, so it’s worth reviewing the specific rules on tax when transferring assets during divorce.
Common mistakes with Gift Hold Over Relief
Errors often occur because people assume that giving away an asset automatically avoids Capital Gains Tax.
Common mistakes include:
- Assuming all gifts are exempt from Capital Gains Tax.
- Failing to check whether the asset qualifies.
- Ignoring the market value rules for gifts and undervalue sales.
- Not making a joint claim with the recipient.
- Overlooking whether shares are in a qualifying trading company.
- Failing to keep evidence supporting the claim.
- Assuming the relief removes the gain rather than deferring it.
Early planning is particularly important where assets are being transferred as part of succession planning or family business arrangements.
Planning before transferring assets
Before gifting a business asset or qualifying shares, it is important to review:
- Whether the asset qualifies for Hold-Over Relief.
- Whether the recipient understands the future tax consequences.
- The current market value of the asset.
- The amount of gain that may be deferred.
- Whether partial relief applies.
- Whether alternative succession planning options should be considered.
Proper planning helps ensure the transfer achieves its intended purpose while avoiding unexpected Capital Gains Tax consequences. Where the transfer is connected to a marital breakdown, the broader rules on capital gains during separation and divorce should also be factored into the planning.
Key takeaways
Gift Hold Over Relief allows qualifying gains to be deferred when business assets or certain shares are gifted or transferred at below market value.
The relief does not eliminate Capital Gains Tax. Instead, the gain is transferred to the recipient through a reduced acquisition cost, meaning the tax is generally paid when the recipient later disposes of the asset.
Understanding Gift Hold-Over Relief eligibility, meeting the relevant Gift Hold-Over Relief rules and making a valid joint claim are essential for a successful claim.
For business owners considering succession planning or transferring assets to the next generation, reviewing Capital Gains Tax Gift Hold-Over Relief before making the transfer can help ensure the correct tax treatment is applied.
Case Study: Transferring Business Shares Through Gift Hold-Over Relief
A referral enquiry was received by our Farringdon office from a business owner who was considering transferring shares in their trading company to the next generation. They wanted to understand whether Gift Hold-Over Relief could help defer the Capital Gains Tax liability and what conditions needed to be satisfied before completing the transfer.
Our advisers reviewed the company’s trading activities, share ownership structure, eligibility requirements and the proposed transfer arrangements to determine whether the shares qualified for Capital Gains Tax Gift Hold-Over Relief. We also provided Capital Gains Tax planning, inheritance tax planning, business succession planning, corporation tax advice, and personal tax planning to ensure the transfer was structured appropriately. By reviewing the transaction before the transfer took place, the client gained clarity on the joint claim requirements, future tax implications for the recipient and the records needed to support the relief claim with HMRC.
