When people hear about capital gains tax on gifts, they often assume it only applies when selling property or shares. In reality, HMRC treats gifts as a disposal. This means you could face CGT even if you didn’t receive any money.
This can feel unfair, especially when you’re simply passing something on to family or helping a loved one. The good news is there are several ways to reduce or avoid capital gains tax on gifts.
This guide will walk you through everything you need to know about capital gains tax and gifts, including:
- What is capital gains tax on gifts,
- Gifting property and capital gains tax,
- 6 ways to avoid or minimise CGT on gifts,
- And much more…
Let’s get into it!
What is Capital Gains Tax (CGT) on Gifts?
Capital Gains Tax (CGT) is a tax on the profit made from selling or disposing of assets. When you give a gift, such as property or shares, HMRC treats it as a disposal. This means if the value of the gift has increased from the original purchase price, you could be liable for CGT on the profit, even though you didn’t sell the asset for money. But don’t worry, there are ways to manage this.
The Basics of Capital Gains Tax on Gifts
Before we go into ways to avoid or reduce CGT, it’s important to understand how the capital gains tax and gifts work.
Who Pays CGT on Gifts?
As the giver, generally you’re responsible for paying any CGT that arises when you give away an asset. The recipient doesn’t pay any CGT on the gift they receive at the time of the transfer.
However, depending on the asset and circumstances, you may be able to defer the tax by using Gift Hold-Over Relief. In cases where hold-over relief is claimed on a qualifying gift, the recipient takes on the potential CGT liability. And the tax is paid when they eventually dispose of the asset.
How is CGT Calculated?
The amount of CGT you owe is calculated based on the difference between what the asset was worth at the time of the gift and what you originally paid for it. This is called the “gain”. If the asset has gone up in value since you bought it, you’ll have to pay CGT on that gain.
How to Avoid Capital Gains Tax on Gifts
When it comes to avoiding capital gains tax on gifts, the key lies in understanding the exemptions, reliefs, and strategic actions you can take.
Here are 6 ways to avoid or minimise CGT on gifts:
1. Use Your Small Annual Tax-Free Allowance Wisely
This is one of the legitimate ways to entirely avoid capital gains tax on gifts.
Every person gets a small amount of profit each year that is completely tax-free. You only pay CGT on gains above this limit. The Annual Exempt Amount (AEA) for 2025/26 is £3,000. You must use this allowance in the current tax year, or you lose it. You can’t roll it over.
Key Tip: If you are married or have a civil partner, you each get the £3,000 allowance. A couple can effectively gift assets that realise £6,000 in total tax-free gains every year.
2. Gifting to a Spouse or Civil Partner
Transfers between spouses are treated on a ‘no gain, no loss’ basis. This means you, the giver, pay absolutely no CGT at the time of the gift. This is another way to avoid capital gains tax on gifts as it doesn’t trigger an immediate tax. It works for all assets, regardless of their value.
This applies as long as you are living together at some point during the tax year of the gift.
The tax liability is simply deferred. Your partner takes the asset at your original purchase cost. And they will be the one responsible for the CGT when they eventually sell it later to someone else.
Key Tip: Use this strategy for tax planning. If you earn a higher salary and are taxed at the higher CGT rate, consider passing the asset to your partner if they earn less. This way, the eventual capital gains tax on any future sale could be taxed at your partner’s lower rate of 18% (if their total taxable income and gains remain within the basic rate band). This will potentially avoid the 24% rate that applies to gains in the higher tax band.
3. Claim Hold-over Relief for Qualifying Business Assets
If you are gifting an asset used in your trade or business, you can use this relief to push the tax bill onto the person receiving the gift.
Hold-over Relief allows you and the recipient to jointly claim to ‘hold over’ the gain. You pay zero tax immediately. The gain is deferred. The person receiving the asset will only pay the tax when they decide to sell it later. This relief mostly applies to assets used in a sole trade, partnership assets, or shares in your unlisted trading company.
Key Tip: This relief does not work for standard buy-to-let rental properties. It requires a joint claim with the person receiving the gift, so you must fill in the right forms with HMRC.
4. Utilise Principal Private Residence (PPR) Relief
If the asset you are gifting is your main home, you are almost certainly covered by PPR relief. This means the gain is often completely wiped out and you avoid capital gains tax on gifts.
PPR Relief makes the gain on your main home entirely tax-free for the time you lived there. If it was your main home for the whole time you owned it, the gain is wiped out. And you owe no CGT on the gift. Even if you moved out recently, the last 9 months of ownership still count as exempt.
Key Tip: Be careful of the Inheritance Tax (IHT) trap. If you gift your home to your children but carry on living there for free, HMRC says it still counts as part of your estate when you die. To avoid the IHT issue, you must move out or pay the new owners a formal, market-rate rent.
5. Gift Small Personal Possessions (Chattels)
There is a simple exemption for valuable items like jewellery, antiques, or paintings. The disposal of these items is exempted from Capital Gains Tax and gifts if the market value (or sale proceeds) of the single asset is £6,000 or less.
If a single item is sold for more than £6,000, special rules (known as marginal relief) apply to calculate the chargeable gain, but the £6,000 threshold still helps reduce the tax bill.
Key Tip: This £6,000 exemption generally applies per item. You can gift several high-value, unrelated items in the same year, and each one benefits from its own £6,000 allowance.
Important Exception (Sets): Special rules apply to items that form a “set” (e.g., a pair of matching vases, a set of chessmen, or a collection of books by the same author that are worth more together). If items in a set are disposed of to the same person (or connected persons), the £6,000 limit applies to the total value of the entire set collectively, not each individual piece.
6. Gift to a Registered UK Charity
If you want to be generous while also avoiding capital gains tax on gifts, gifting assets to charity is an excellent option.
The disposal of assets like shares, land, or property to a registered UK charity is entirely exempted from Capital Gains Tax. The gain is simply wiped out. This applies to gifts to recognised UK charities or Community Amateur Sports Clubs.
Key Tip: You get a double tax advantage. You avoid the CGT bill, and you can also claim Income Tax relief on the market value of the gifted asset, which lowers your total income tax bill for the year.
Cash Gifts And Capital Gains Tax
Cash gifts do not create a capital gain because money itself doesn’t increase in value in the same way property, shares, or other assets do. HMRC only charges capital gains tax when you dispose of an asset that has risen in value. Handing over cash is not considered a disposal of a chargeable asset.
While cash gifts are free from CGT, they can have Inheritance Tax (IHT) implications:
- You can give away up to £3,000 per tax year under the annual exemption without IHT concerns.
- Small gifts of up to £250 per person per tax year are also exempt.
- Larger gifts may be classed as “potentially exempt transfers.” If you survive seven years after making the gift, they are free of IHT
Check Out: What Are The Taxes On Gifted Money And How To Pay Taxes On Gifted Money?
Are There Inheritance Tax Issues To Consider With Gifts?
Yes, gifts can have both CGT and Inheritance Tax (IHT) implications.
- A gift to an individual is usually a Potentially Exempt Transfer (PET). If you survive for seven years after making the gift, it is no longer considered part of your estate for IHT purposes.
- If you die within seven years, the gift may be subject to IHT.
- Gifts into most trusts can also trigger immediate IHT charges.
How Do I Avoid Capital Gains Tax On Gifted Property UK?
If you gift property in the UK, HMRC usually treats it as if you sold it at market value. That means CGT could apply even if you didn’t receive any money. As discussed above, the main ways to avoid or reduce capital gains tax on gifts are:
- Spouse or civil partner transfers: Gifting property to your spouse or civil partner (if living together) does not incur an immediate CGT charge.
- Principal Private Residence Relief: Your main residence is generally exempt from CGT. But second homes or investment properties are not.
- Charity gifts: Property gifted to a registered UK charity is exempt.
- Annual exempt amount: Each person has a £3,000 annual CGT allowance for the 2025/26 tax year.
- Business asset reliefs: Gift Hold-Over Relief can defer a gain on certain business assets, but this generally does not apply to residential property.
For family homes, remember that your main residence is usually exempt from CGT, but second homes or investment properties are not.
How To Avoid Capital Gains Tax When Gifting A Property?
The main strategies for avoiding or deferring CGT when gifting a property depend on the relationship with the recipient and the property’s use. Gifting to a spouse or civil partner is the most effective method for deferring CGT, as the transfer is on a “no gain, no loss” basis. If the property was your main home, PPR relief can make the gain exempt.
For gifts to non-spouses, CGT is calculated based on the market value, but you can use your annual £3,000 exempt amount. If CGT is owed, you must report the disposal to HMRC and pay the tax within 60 days of the gift.
Inherited properties are treated differently. The person inheriting the property receives it at its market value at the date of death. CGT is only applied to any growth in value from the date of inheritance until a subsequent disposal by the inheritor.
What Is Hold-Over Relief, And When Can You Claim It?
Hold-over Relief is a way to postpone or ‘hold over’ a CGT bill when you gift certain assets. The tax liability is transferred from you, the giver, to the person receiving the gift. The recipient will then be responsible for the tax when they eventually sell the asset.
- How do you claim? You and the recipient must jointly make a claim to HMRC.
- What assets qualify? This applies to gifts of business assets, such as shares in an unlisted trading company, and agricultural land.
How To Avoid Capital Gains Tax On Gifts From Parents?
When parents gift assets such as property or shares to children, CGT can apply. To reduce or avoid capital gains tax on gifts from parents:
- Parents can use their annual CGT allowance (£3,000 each).
- If the asset is a business property or shares in a trading company, Hold‑over Relief may apply.
- If the gift is of the family home where the parent lived, Private Residence Relief can exempt the gain.
It’s also important to consider Inheritance Tax rules, since gifts from parents may be subject to the 7‑year rule if they pass away within that period.
What About Gifting Assets To Children Or Other Family Members?
For gifts to ‘connected persons’, such as children, siblings, or parents, the market value rule applies. HMRC will treat the gift as if you had sold it for its full market value, and you will pay CGT on any gain.
- Be aware of the rules: Trying to sell an asset to a family member for less than market value will not help you avoid CGT, as HMRC will still calculate the tax based on the full market value.
- Remember the annual allowance: Use your £3,000 CGT annual exemption to reduce the taxable gain (where applicable).
Do Gifts To Charities Trigger Capital Gains Tax?
No. Donating an asset to a UK registered charity is completely exempt from CGT. You can support a cause you care about and pass on a valuable asset without worrying about capital gains tax on gifts to charities.
The Bottom Line
The key to avoiding or at least minimising capital gains tax on gifts is to plan your gifts carefully and make the most of the available reliefs and exemptions.
If you’re unsure about how to handle CGT on your gifts, it’s always a good idea to seek expert advice.
HOW ACCOTAX CAN HELP?
At Accotax, we are here to assist with all your tax needs, including managing Capital Gains Tax on gifts. We offer a range of packages designed to fit your unique needs!
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Disclaimer: The information about How to Avoid Capital Gains Tax on Gifts? provided in this article including text and graphics. It does not intend to disregard any of the professional advice.
