Key takeaways
- Giving an asset away is a disposal at market value, so a gift can create a CGT bill even though no money changes hands.
- Gift holdover relief defers the gain: the recipient takes over the donor's base cost and pays CGT when they eventually sell.
- It is available for gifts of business assets, including shares in unquoted trading companies, and for gifts into most trusts that are immediately chargeable to Inheritance Tax.
- For business assets, the donor and recipient make a joint claim; relief is restricted for companies holding investments.
- It is not available for gifts to non-residents, and the claim must be made within four years of the end of the tax year.
Passing a family business or farm to the next generation is usually a gift, and for Capital Gains Tax (CGT) a gift is treated as a sale at market value. Without relief, the parent would pay CGT on a gain they never received in cash. Gift holdover relief postpones that tax until the recipient sells.
How it works
When holdover relief is claimed:
- the donor’s gain on the gift is calculated as if the asset were sold at market value
- the gain is held over, so the donor pays no CGT
- the recipient’s base cost is the market value minus the held-over gain, effectively the donor’s original cost
- when the recipient later sells, the gain includes the held-over amount
Example
Gwen gives her son her 100% shareholding in an unquoted trading company. She subscribed £10,000 for the shares, which are now worth £500,000.
| Without relief | With holdover relief | |
|---|---|---|
| Gwen’s gain | £490,000 | £490,000 held over |
| Gwen’s CGT | Payable now | Nil |
| Son’s base cost | £500,000 | £10,000 (£500,000 − £490,000) |
If the son later sells for £600,000, his gain is £590,000. He may be able to claim Business Asset Disposal Relief if he meets the conditions at that time.
Which gifts qualify
Business assets (section 165)
Relief is available for gifts of:
- assets used in the donor’s trade, profession or vocation, or in the trade of their personal company (where they hold at least 5% of the voting rights) or of a partnership they are in
- shares in an unquoted trading company (including AIM shares)
- shares in a quoted trading company, if it is the donor’s personal company
- agricultural property that would qualify for Inheritance Tax agricultural property relief
Gifts into trust (section 260)
Holdover relief is also available for gifts that are immediately chargeable to Inheritance Tax, such as gifts into most discretionary trusts, even if the assets are not business assets and even if no Inheritance Tax is payable because the gift falls within the nil-rate band. Only the donor needs to claim. See trusts and Inheritance Tax.
Restrictions
- Companies with investments: for shares, relief is restricted if the company holds chargeable assets that are not used in the trade, such as investment property. The held-over gain is reduced by the fraction of chargeable business assets to total chargeable assets.
- Part sales: if the recipient pays something, the gain is only held over to the extent the payment does not exceed the donor’s cost; any excess is taxed now.
- Non-residents: relief is not available if the recipient is not UK resident.
- Emigration: if the recipient becomes non-resident within six years, the held-over gain can come back into charge.
- Settlor-interested trusts: section 260 relief is not available for gifts into trusts from which the donor or their spouse can benefit.
The government has announced it will consult on modernising the formula that restricts holdover relief for shares, so check for changes before relying on it.
Making a claim
- For business asset gifts, the donor and recipient sign a joint claim. For gifts into trust, the donor claims alone.
- Use the claim form in HMRC’s helpsheet HS295, and send it with the donor’s tax return for the year of the gift, or separately.
- The claim must be made within four years of the end of the tax year of the gift.
- A formal market valuation is not always needed: HMRC can accept a claim without agreeing the value, but both parties must accept that a value will be needed when the recipient eventually sells.
Holdover or pay now?
Holding over is not always the best choice:
- the donor might have losses or an unused annual exempt amount to cover the gain
- the donor might qualify for Business Asset Disposal Relief at 18% now, while the recipient may not later
- if the asset will be held until the recipient’s death, the gain may never be taxed, because there is no CGT on death
Consider Inheritance Tax at the same time: a gift of business assets may qualify for Business Property Relief, and surviving seven years removes it from the donor’s estate. See Business Property Relief.
Frequently asked questions
What is gift holdover relief?
A relief that defers the Capital Gains Tax on a gift of business assets, or a gift into trust, by passing the donor’s base cost to the recipient.
Who has to sign a holdover relief claim?
Both the donor and the recipient for gifts of business assets. For gifts into a trust, only the donor.
Can I hold over a gain on gifting a buy-to-let property?
Not as a business asset, because letting is an investment. A gift into a discretionary trust may qualify for holdover under the trust rules, but the trust has Inheritance Tax consequences.
What is the time limit for a holdover relief claim?
Four years from the end of the tax year in which the gift was made.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.