Gift Hold-Over Relief can be valuable when business owners give shares to family members or other individuals as part of succession planning. The relief can defer a Capital Gains Tax (CGT) charge that might otherwise arise because a gift is generally treated as taking place at market value. 

A change already announced at Budget 2025 will alter the calculation of relief for certain gifts of shares from 6 April 2027. Budget 2026 confirms the wider legislative programme, so business owners considering share gifts should understand both the existing rules and the forthcoming change. 

How Gift Hold-Over Relief works 

Under section 165 of the Taxation of Chargeable Gains Act 1992, qualifying gains on gifts of business assets can be deferred. Broadly, the donor and recipient jointly claim relief: the donor’s gain is reduced, while the recipient effectively takes on that deferred gain through a lower CGT base cost. The tax has therefore generally been postponed rather than eliminated. 

For shares, relief can be available where the shares are unlisted, or where they are in the donor’s personal company, provided the relevant trading conditions are met. Where the company or group owns assets that are not used for its trade, the legislation can restrict the proportion of the gain eligible for relief. 

Separate rules under section 260 can apply to gifts that are chargeable transfers for Inheritance Tax (IHT) purposes, including many transfers into trust. A straightforward lifetime gift from one individual to another is normally a potentially exempt transfer for IHT purposes and does not qualify for section 260 relief solely on that basis, although section 165 may still apply if the business-asset conditions are met. 

What is changing from 6 April 2027? 

The forthcoming measure affects the statutory formula used to restrict section 165 relief on gifts of shares or securities where the underlying company or group holds assets not used for its trade. 

HMRC says the change will bring into the calculation assets that would be chargeable assets but for their treatment under the substantial shareholding exemption (SSE) or the intangible fixed assets (IFA) regime. Goodwill created or acquired on or after 1 April 2002 is one example of an asset that may fall within the IFA regime. 

The policy objective is to restore the way the restriction formula operated before the introduction of the SSE and IFA regimes and remove distortions that can arise under the current calculation. 

The measure was announced at Budget 2025 and is intended to apply to disposals made on or after 6 April 2027. HMRC’s published policy paper describes amendments to paragraph 7(2)(b) of Schedule 7 to TCGA 1992. As with any measure not yet in force, the final legislation should be checked before a transaction is completed. 

Worked example 

Consider a simplified example. An individual gives shares in an unlisted trading company to an adult child. The shares have a market value of £1 million and an allowable base cost of £200,000, so the gain before relief is £800,000. 

Assume the company has £600,000 of assets used for its trade, £300,000 of post-1 April 2002 goodwill within the IFA regime and £100,000 of investment assets that are not used for the trade. For illustration, assume there are no other adjustments and that all the other conditions for section 165 relief are met. 

Under the current restriction formula, the IFA goodwill is not itself a chargeable asset for these purposes. The presence of the £100,000 investment asset can therefore produce a disproportionate restriction because the £300,000 of trading goodwill is omitted from the denominator. On these simplified figures, the relevant fraction is £600,000 ÷ £700,000, so approximately 85.7% of the £800,000 gain — about £685,714 — can be held over. The remaining gain of about £114,286 is immediately chargeable. 

For a disposal on or after 6 April 2027, the new rule treats the £300,000 of IFA goodwill as a chargeable asset for the restriction calculation. The fraction therefore becomes £900,000 ÷ £1 million. On the same assumptions, 90% of the £800,000 gain, or £720,000, can be held over, leaving £80,000 immediately chargeable. 

The example shows the purpose of the amendment: it prevents qualifying trading assets within the IFA or SSE rules from being left out of the calculation simply because they are not chargeable assets under the existing wording. Actual calculations will depend on the company’s or group’s asset composition and the detailed statutory rules, so the figures should be modelled for each proposed gift. 

Who is likely to be affected? 

HMRC identifies individuals giving shares or securities in a trading company, or the holding company of a trading group, where the company is the donor’s personal company or the shares or securities are unlisted. 

The change is particularly relevant where a trading company or group owns substantial shareholdings in other companies or intangible assets and also has non-trading assets. Under the revised calculation, the amount of the gain that can be held over may differ from the amount available under the current rules. 

This does not mean every gift of company shares after 5 April 2027 will receive more or less relief. The outcome depends on the particular company or group, its assets and the statutory calculation. Nor does the change remove the need to establish that the shares and company satisfy the underlying qualifying conditions. 

What should business owners do now? 

Anyone considering a succession-related gift of shares should avoid looking at CGT in isolation. Before proceeding, it is sensible to: 

• establish whether section 165 or section 260 relief could apply; 

• obtain appropriate share and underlying asset valuations; 

• review the company or group’s trading status and identify material non-trading assets; 

• model the hold-over calculation under the rules applying on the proposed transaction date; and 

• consider the CGT position alongside IHT, commercial objectives and the recipient’s future tax position. 

Timing may matter where a transaction could take place either side of 6 April 2027, but tax should not dictate a commercially unsuitable gift. The existing and revised calculations should instead be compared using the facts of the particular business. 

Conclusion 

Gift Hold-Over Relief remains an important tool for genuine business succession, but the calculation for certain gifts of shares is changing from 6 April 2027. Business owners planning a transfer should review the composition of the relevant company or group and quantify the relief available before committing to the transaction.