Taxation (UK) · The use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets

Gift Holdover Relief for Capital Gains Tax in TX-UK

Updated 11 October 2026 · Fact-checked

Gift holdover relief defers the capital gain when you give away a qualifying business asset, or make any gift that is a chargeable lifetime transfer for inheritance tax. The donor's gain is held over, and the donee's base cost is reduced by the held-over gain. If the donee pays something, tax is due on the excess over cost.

Understand Gift Holdover Relief

A gift of an asset is a disposal for capital gains tax. It is treated as made at market value, even though no cash changes hands. That can create a tax bill with no money to pay it. Gift holdover relief solves this by deferring the gain.

The gain is not wiped out. It is held over and passes to the person who receives the asset (the donee). The donor's chargeable gain becomes nil. The donee's base cost is the market value at the date of the gift less the held-over gain. When the donee later sells, the deferred gain comes back into the donee's computation.

The relief applies in two situations. First, gifts of business assets: assets used in the donor's trade (or in the trade of the donor's personal company), shares in an unquoted trading company, shares in the donor's personal trading company (listed or not), and agricultural property that qualifies for agricultural property relief. Second, any asset at all where the gift is a chargeable lifetime transfer for inheritance tax, such as a gift into a discretionary trust.

The relief also works on a sale at less than market value to anyone, if the asset is a qualifying business asset or the transfer is a chargeable lifetime transfer. Then the donor pays tax only on the part of the gain covered by the actual proceeds, in excess of cost.

The claim is made jointly by donor and donee. For a gift into trust, the donor and the trustees can claim. The relief is not automatic. It is a claim, and in the exam you normally assume it is made unless told otherwise. You should know it must be made within four years of the end of the tax year of the gift. If only part of a company's assets are business assets, or a building is only partly used for business, the held-over gain is restricted accordingly.

A gift can also be a potentially exempt transfer for inheritance tax. A gift of business assets to an individual is usually a PET, so holdover relief is available because the asset is a business asset, not because the gift is a CLT. Both taxes can apply to the same gift, so you must treat each separately.

Key rules to remember

Deemed proceeds on a gift: Proceeds = market value at date of gift; Use market value for a gift, and for a sale at undervalue to a connected person or where the sale is not at arm's length.
Gain before relief: Gain = market value − allowable cost (incl. enhancement and incidental costs); Work this out first, even if the whole gain is going to be held over.
Gain held over (full gift): Held-over gain = whole chargeable gain; No consideration received, so the donor's chargeable gain is nil.
Gain held over (part consideration): Held-over gain = gain − (actual consideration − allowable cost); Only if actual consideration exceeds cost. If the consideration is at or below cost, the whole gain is held over.
Gain chargeable now: Chargeable now = lower of (actual consideration − cost) and the gain; This is taxed on the donor after the annual exempt amount of £3,000 and any losses. Rates are 18% and 24%.
Donee's base cost: Donee's base cost = market value at gift − held-over gain; Where the donee paid part consideration, this base cost still applies.
Inheritance tax rates in the tables: Nil rate band £325,000; lifetime rate 20%; death rate 40%; Applies to chargeable lifetime transfers, with the lifetime tax on the excess over the available nil rate band. Taper relief applies only on death within seven years.

How to solve Gift Holdover Relief questions

Use this order for any gift holdover question. It keeps the marks for each stage and stops you missing the donee's base cost.

1Identify the asset and the recipient. Decide whether it is a qualifying business asset, or whether the gift is a chargeable lifetime transfer. If neither, no relief is available.
2Find the deemed proceeds: market value for a gift, or market value for an undervalue sale. Note any actual consideration received.
3Compute the gain before relief: market value less allowable cost.
4Check for restrictions: non-business assets in a company, or part-business use of a building. Reduce the relief if so.
5Calculate the held-over gain. For a pure gift, it is the whole gain. With consideration, deduct the excess of consideration over cost from the gain.
6Deal with any gain chargeable now: deduct losses and the annual exempt amount of £3,000, then apply 18% or 24% depending on the donor's remaining basic rate band.
7State the donee's base cost: market value less held-over gain.
8Add the inheritance tax point if asked: PET or CLT, the nil rate band and the 20% lifetime rate for a CLT, and the donee's possible reduction of gain for IHT paid.

Quickest way: Three-line holdover shortcut

When to use it: Use in Section A or in OT case questions where you only need the gain held over, the gain now taxed, or the donee's base cost.

Work out gain = market value − cost.
If the donee pays nothing, or pays no more than cost: held over = gain, chargeable now = nil.
If the donee pays more than cost: chargeable now = consideration − cost (not more than the gain). Held over = gain − that figure. Donee's base cost = market value − held over.

Common mistakes in Gift Holdover Relief

Using the sale proceeds instead of market value when the asset is given away or sold at undervalue.
Students think gains arise only on cash received.
Fix: A gift is deemed made at market value. Always start the computation with market value.
Deducting the whole consideration from the gain when part consideration is paid.
The rule is mixed up with part-disposal or rollover rules.
Fix: Deduct only the excess of consideration over cost. Held over = gain − (consideration − cost).
Forgetting to reduce the donee's base cost by the held-over gain.
Students focus on the donor and stop after the donor's nil gain.
Fix: Always write: donee's base cost = market value − held-over gain.
Applying gift relief to any gift, such as a gift of quoted shares in a company the donor does not control, or a gift of a private car.
The word 'gift' feels like enough.
Fix: Check the asset category first. Only qualifying business assets or CLTs qualify. Quoted shares qualify only if the company is the donor's personal company.
Not using the annual exempt amount against the gain chargeable now.
The held-over gain distracts from the remaining gain.
Fix: After holdover, treat what is left as the normal gain. Deduct the £3,000 annual exempt amount and any losses before applying the rates.
Mixing up the two taxes: saying holdover relief removes inheritance tax, or that IHT relief removes CGT.
Both taxes are triggered by the same gift.
Fix: Treat CGT and IHT separately. State the CGT result, then the IHT status (PET or CLT) and what applies.

Worked examples

Example 1

In December 2025 Ann gives her son shares in an unquoted trading company. She bought them for £40,000. Their market value at the gift is £200,000. A joint claim for gift relief is made. The son later sells the shares for £250,000. Calculate Ann's chargeable gain on the gift and the son's chargeable gain on the sale.

Show the solution

Unquoted trading company shares are qualifying business assets, so gift relief is available.
Gain before relief = £200,000 − £40,000 = £160,000.
No consideration was paid, so the whole gain is held over. Ann's chargeable gain is nil.
Son's base cost = £200,000 − £160,000 = £40,000.
Son's gain on sale = £250,000 − £40,000 = £210,000, before his annual exempt amount of £3,000 and any other reliefs.

Answer: Ann's chargeable gain is nil (£160,000 held over). The son's gain on the later sale is £210,000 before the annual exempt amount.

Example 2

Ben sells a factory used in his sole trade to his nephew for £150,000. It cost Ben £120,000, and its market value at the sale is £350,000. Ben claims gift relief jointly with his nephew. Ben is a higher rate taxpayer and has already used his annual exempt amount (assume none left). Calculate his CGT payable, the gain held over and the nephew's base cost.

Show the solution

The factory is a business asset, so relief is available on the undervalue sale.
Proceeds are deemed to be market value: £350,000. Gain before relief = £350,000 − £120,000 = £230,000.
Excess of actual consideration over cost = £150,000 − £120,000 = £30,000.
Held-over gain = £230,000 − £30,000 = £200,000.
Gain chargeable now = £30,000. No annual exempt amount is left, so taxable gain is £30,000.
CGT at the higher rate of 24% = £30,000 × 24% = £7,200.
Nephew's base cost = £350,000 − £200,000 = £150,000.

Answer: Gain held over is £200,000. Ben's chargeable gain is £30,000, with CGT of £7,200. The nephew's base cost is £150,000.

Exam tips

Read the asset description first. Many questions test whether the asset qualifies, so a quoted share in a non-personal company means no relief.
Show the market value, cost and gain, even when the whole gain is held over. The marks are for method.
With part consideration, label the two figures clearly: held over and chargeable now. Then compute tax on the second only.
In Section C, finish with the donee's base cost and, if asked, the IHT position: a PET or a CLT, and the nil rate band of £325,000 and 20% lifetime rate for a CLT.
In objective questions, expect the donee's base cost or the gain chargeable now as the answer. A wrong answer scores zero, so check your subtraction twice.

Practice questions from The use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets

Gift Holdover Relief in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Strategic ProfessionalGift Holdover Relief and Rollover Relief

Gift Holdover Relief: frequently asked questions

Who can claim gift holdover relief?

The donor and the donee claim jointly for gifts of qualifying business assets. For a gift that is a chargeable lifetime transfer, such as into a trust, the donor and the trustees claim. The claim must be made within four years of the end of the tax year of the gift.

How do you calculate gift relief when the donee pays something?

Find the gain using market value. If the amount paid is more than the donor's cost, that excess is taxed now. The held-over gain is the total gain less that excess. If the amount paid is at or below cost, the whole gain is held over.

Can I claim gift relief on a gift of a house or quoted shares?

Not usually, unless the gift is a chargeable lifetime transfer or the asset is a qualifying business asset. A gift of quoted shares qualifies only if the company is the donor's personal company. A let or private house does not qualify, apart from a gift to a trust that is a CLT.

How do gift holdover relief and inheritance tax interact?

Both can apply to the same gift. A gift to an individual is normally a PET, with no IHT unless the donor dies within seven years. A gift to a trust is a CLT, taxed at 20% on the excess over the nil rate band of £325,000. If IHT is paid on the gift, the donee's later gain can be reduced, but not below nil.