Last updated: 16 October 2026
What is gift holdover relief?
When you give away business assets or shares in your unlisted trading company, the gift is treated as a sale at market value for capital gains tax (CGT). Gift holdover relief lets you and the person receiving the gift jointly claim to defer the gain. The recipient takes on your original base cost, so the gain is taxed only when they sell. This is often used when owners hand the family company to adult children as they approach retirement.
Why owners use it
Many owners first appoint their children as directors while keeping the shares, then later transfer some or all of the shares. Holdover relief means no CGT on the transfer, and the gift may also qualify for Business Property Relief (BPR) for inheritance tax.
The tax traps
| Trap | What happens |
| Recipient emigrates | If the recipient becomes non-UK resident within six years of the gift, the held-over gain becomes taxable on them |
| Non-business assets in the company | Relief is restricted if the company holds investments, such as let property or surplus cash, that are chargeable non-business assets |
| Partial consideration | If the child pays anything, the amount above your base cost is taxed straight away |
| Gift to a trust you can benefit from | Holdover relief is not available for gifts to settlor-interested trusts |
| BPR clawback | If you die within seven years and the child has sold the shares, BPR on the failed gift can be lost |
The BPR clawback trap explained
A gift of shares is a potentially exempt transfer for inheritance tax. If you die within seven years, it becomes chargeable, and BPR only applies if the recipient still owns the shares (or replacement business property) at your death. If your son sells the company two years after the gift and you die in year four, the gift could be taxed at up to 40%, less any taper relief, with no BPR.
The new BPR cap
From 6 April 2026, 100% Agricultural and Business Property Relief is limited to a combined £2.5 million per person, with 50% relief above that. The allowance can be transferred between spouses. Larger family companies may face some inheritance tax even with BPR.
Example
Graham gives his daughter 60% of the shares in his engineering company, worth £1.2 million with a base cost of £1,000. He and his daughter claim holdover relief, so no CGT is due now. The company has £300,000 of surplus cash invested in a bond, which is a non-business asset, so part of the gain cannot be held over and is taxed now. If his daughter keeps the shares and Graham survives seven years, no inheritance tax arises. If she sells within seven years and he dies, BPR could be lost.
Alternatives
- Gift the shares and claim BADR at 18% on the gain instead of holding it over, so the child gets a market value base cost.
- Transfer shares gradually.
- Use a company purchase of own shares or a family investment company structure.
Frequently asked questions
Is a holdover claim automatic?
No. It must be claimed jointly, usually on form HS295.
Can holdover be claimed on gifts to a spouse?
It is not needed, as spouse gifts are at no gain, no loss.
Does holdover apply to residential property?
Not unless it is a business asset, such as a qualifying furnished holiday let before April 2025.
What is the time limit to claim?
Four years from the end of the tax year of the gift.
Related: gifting money to reduce IHT, inheritance tax relief cut for farms and incorporating and CGT relief.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with passing on a family business. See our inheritance tax planning service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
