Gift Hold-Over Relief lets the person making a gift defer the capital gains tax that would otherwise arise, by passing the gain to whoever receives the asset. It defers the tax, it does not delete it: the recipient takes on your original cost, so the gain surfaces again when they sell. The real questions are which of the two routes applies, and whether holding over leaves anyone better off (gov.uk / HMRC, as at August 2026, subject to change).
What is Gift Hold-Over Relief?
Gift Hold-Over Relief is a capital gains tax relief you claim when you give away a qualifying asset, or sell it for less than it is worth. The gain is "held over": the person making the gift pays no capital gains tax now, and the recipient takes on the asset at the giver's original cost, so the deferred gain is taxed when they later dispose of it.
Without it, giving an asset away is treated as a disposal at market value, so a gift can create a tax bill even though no money changes hands. The relief is not automatic, must be claimed, and covers gains only, not inheritance tax.
Which route applies: s165 or s260?
Two sections of the Taxation of Chargeable Gains Act 1992 give hold-over relief, and they cover different gifts. Section 165 covers gifts of business assets, including unlisted trading company shares. Section 260 covers gifts that are themselves chargeable to inheritance tax, most often a transfer into a discretionary trust. A gift qualifies under one route or the other, not by choice.
This is the split most guides blur. Work out your route first: it decides the qualifying conditions, who signs the claim, and the traps below.
| Section 165: business assets | Section 260: gifts into trust | |
|---|---|---|
| Typical gift | A trading business, or shares in an unlisted trading company you own | An asset transferred into a relevant property trust, chiefly a discretionary trust |
| Qualifying assets | Assets used in your trade, shares in your personal company (5%+ of voting rights), qualifying agricultural property | Cash aside, most assets: the trigger is the inheritance tax charge, not the asset type |
| What makes it qualify | The nature of the asset (business use) | The gift being a chargeable transfer for inheritance tax |
| Residential property | Your main home does not qualify; a buy-to-let is not a business asset | Can apply on a transfer into trust, but see the traps below |
Source: gov.uk / HMRC (s165 qualifying assets) and gov.uk / HMRC (s260), as at August 2026, subject to change. For the trust route, see using trusts in estate planning and what a chargeable lifetime transfer is.
How do you claim Gift Hold-Over Relief?
You claim by making an election to HMRC on form HS295, within four years of the end of the tax year in which the gift was made. For a gift to another person, both the giver and the recipient must sign. For a gift into a trust, only the person making the gift needs to claim, because trustees hold the asset jointly.
- Confirm the gift qualifies. Check it falls under section 165 (a business asset) or section 260 (a chargeable transfer into trust). If it fits neither, hold-over relief is not available.
- Work out the held-over gain. Calculate the gain as if you had sold at market value on the date of the gift. That figure is deferred and passed to the recipient.
- Complete form HS295. Sign the election. For a gift to an individual, the recipient signs too; for a gift to trustees, your signature alone is enough.
- Report and keep records. Include the claim with your Self Assessment return for the year of the gift, and keep the base-cost figures, which the recipient needs when they sell.
Source: gov.uk / HMRC, Helpsheet HS295, as at August 2026, subject to change.
How much capital gains tax does hold-over defer?
Hold-over defers the capital gains tax the giver would have paid at current rates: 18% within the basic-rate band and 24% above it for 2026 to 2027, after the £3,000 annual exempt amount. The gain then sits with the recipient at the giver's original cost, so the tax is postponed, not saved, unless their circumstances make it cheaper later. Rates of 10%, 20% and 28% predate the October 2024 Budget (gov.uk, subject to change).
Worked example: gifting unlisted trading shares worth £200,000
You give your son shares in your trading company. You paid £50,000; they are now worth £200,000, so the gain is £150,000. You are a higher-rate taxpayer.
- No hold-over: £150,000 less the £3,000 annual exempt amount is £147,000, taxed at 24% = £35,280 for you now.
- With hold-over: you pay £0 now. Your son takes the shares at your £50,000 cost. If he later sells for £200,000, the same £150,000 gain is his to report.
The £35,280 is deferred, not removed.
Holding over helps most where the recipient holds long term or expects a lower rate later. Figures illustrative, subject to change.
What do people get wrong about hold-over relief?
The common mistakes treat hold-over as if it wipes out tax. It does not. The recipient inherits your low cost, a gift into trust can trigger an immediate 20% inheritance tax charge, that same trust may lose future main-residence relief, and the whole relief can be clawed back if the recipient leaves the UK within six years.
1. It defers, it does not delete. The recipient takes your original cost, so the deferred gain reappears when they sell. If they sell soon after, the tax lands on them instead of you, often at the same rate.
2. A gift into trust can be taxed twice over. Section 260 works because the gift is a chargeable transfer for inheritance tax. A transfer into a discretionary trust above the £325,000 nil-rate band carries a 20% lifetime charge (gov.uk, subject to change), so you defer the capital gains tax but may create an inheritance tax bill on the same gift.
3. Trusts can lose main-residence relief. Where hold-over is claimed on a home going into trust under section 260, the trustees cannot later claim private residence relief on it (TCGA 1992 s226A). A relief now can cost a larger one later.
4. Six-year clawback if the recipient emigrates. If the recipient, or the trustees, become non-resident within six years of the end of the tax year of the gift, HMRC can claw back the held-over gain and tax it (gov.uk / HMRC, TCGA92/S168 clawbacks, subject to change). See also business relief after the 2026 reform and how much you can gift tax free each year.
Frequently asked questions
What assets qualify for gift hold-over relief?
Under section 165: assets used in your trade, shares in your personal trading company (5% or more of the voting rights), unlisted trading shares, and qualifying agricultural property. Under section 260: most assets, if the gift is a chargeable transfer for inheritance tax, typically a transfer into a discretionary trust (gov.uk, subject to change).
Can you claim hold-over relief on a buy-to-let property?
Not under section 165, because a rental property is an investment, not a business asset, and your main home does not qualify either. Relief may be possible under section 260 if the property goes into a trust, though that can bring a 20% inheritance tax charge and the loss of future main-residence relief (gov.uk, subject to change).
What is the time limit to claim gift hold-over relief?
The election must reach HMRC within four years of the end of the tax year of the gift, on form HS295. For a gift to a person, both giver and recipient sign; for a gift into a trust, the giver signs alone (gov.uk / HMRC, subject to change).
Does hold-over relief avoid inheritance tax?
No. Hold-over relief is a capital gains tax relief only. The same gift still follows the inheritance tax rules: an outright gift to a person is usually a potentially exempt transfer, while a gift into a discretionary trust can carry an immediate 20% charge above the nil-rate band (gov.uk, subject to change).