Gift holdover relief under TCGA 1992 s.165 allows a donor to give away qualifying business or agricultural assets without paying CGT immediately. Instead of the donor paying tax on the gain, the gain is held over and the recipient takes the asset with a reduced base cost. When the recipient eventually sells, they pay CGT on a larger gain that includes the held-over amount. The tax is deferred, not eliminated.
This calculator helps you understand the split between any immediately chargeable gain (relevant if consideration is received), the gain held over, the recipient's base cost, and the estimated future CGT if the recipient were to sell at current market value.
Key Conditions for Holdover Relief (s.165)
- Asset must be used in the donor's trade, or be shares in a qualifying trading company.
- Agricultural property qualifying for APR also qualifies.
- Both donor and recipient must jointly elect for the relief (Form HS295).
- Election must be made within 4 years of the end of the tax year of disposal.
- Does not apply to residential property not used in a business.
Holdover Relief Calculator
For pure gifts (consideration = £0) with a qualifying asset, all gain is typically held over and no CGT is due now. If consideration exceeds original cost, the excess is immediately chargeable. Results are illustrative. Always confirm with a tax adviser.
How Holdover Relief Works in Practice
When you give away a business asset, HMRC normally treats the disposal as occurring at market value, creating a deemed gain equal to the difference between market value and original cost. Without holdover relief, the donor would pay CGT on that gain in the year of disposal even though no cash changed hands. This can be a significant cash flow problem when gifting illiquid assets like a farm or a minority stake in a family trading company.
Holdover relief resolves this by allowing the donor and recipient to jointly elect that the gain is held over. The donor's CGT liability is extinguished for now, and the recipient takes the asset with a base cost reduced by the held-over gain. In effect, the recipient inherits the donor's embedded gain. The tax will eventually be paid — but by the recipient, at the time they choose to dispose of the asset, at whatever CGT rates apply then.
This makes holdover relief particularly useful for succession planning in family businesses and farms, where a business owner wants to pass on assets to the next generation while managing immediate tax costs. The recipient should understand that they are acquiring an asset with a built-in future CGT liability.
Part Sale, Part Gift (Mixed Transactions)
If consideration is received — meaning the recipient pays something for the asset, even if below market value — the transaction has both a sale element and a gift element. In such cases, the gain attributable to the actual consideration above the original cost is immediately chargeable to the donor. Only the remaining gain (relating to the gift element over and above consideration) can be held over.
For example, if a business asset worth £400,000 with an original cost of £100,000 is transferred for £150,000 (below market value), the gain on the deemed disposal is still £300,000 (market value of £400,000 minus cost of £100,000). However, the consideration of £150,000 exceeds the original cost of £100,000, so £50,000 (£150,000 minus £100,000) is immediately chargeable. The remaining £250,000 can be held over, giving the recipient a base cost of £150,000 (£400,000 minus £250,000).
The calculator above models this: enter consideration greater than zero to see the split between the immediately chargeable gain and the gain held over.
Holdover Relief and Inheritance Tax Planning
Holdover relief and IHT relief often work together in estate planning. If you give away qualifying business property (relievable under Business Property Relief at 100%), there may be no IHT on the transfer either. Combined with holdover relief, this can produce a very tax-efficient succession: no IHT and no immediate CGT. The deferred gain sits in the recipient's hands and will be taxed when they eventually sell or pass on the asset.
Where the gift is into a discretionary trust and is immediately chargeable to IHT, a different holdover provision applies — section 260 of TCGA 1992. Section 260 holdover is broader (it applies to any asset, not just business assets) but it can only be claimed where the IHT charge actually applies. If both sections could apply (which rarely arises), s.260 takes precedence.
It is important to get the IHT and CGT planning right simultaneously. A gift that is a PET for IHT (potentially exempt if the donor survives 7 years) can also qualify for s.165 holdover relief if the asset qualifies. If the donor dies within 7 years, IHT becomes due on the gift, but the CGT holdover has already been made and the recipient's base cost is not affected by the IHT consequences.
Shares in Private Companies
Holdover relief under s.165 is available for gifts of shares in unlisted trading companies without any minimum holding requirement. It is also available for shares in a personal company (where the donor holds at least 5% of the voting rights) even if the company is listed. For fully listed companies where the donor does not have a personal company connection, s.165 holdover is generally not available for the share gift.
The company must be a trading company or the holding company of a trading group. Investment companies, property investment companies, and companies with substantial non-trading activities may not qualify. HMRC has detailed guidance on the trading condition, and professional advice is strongly recommended when applying holdover relief to company shares, particularly where there is any investment activity.
Frequently Asked Questions
What is gift holdover relief?
Gift holdover relief under TCGA 1992 s.165 allows the donor of a qualifying business or agricultural asset to elect to defer CGT on a gift. The gain is not taxed immediately; instead it reduces the recipient's base cost, and the recipient pays a larger CGT when they eventually sell.
Which assets qualify for holdover relief under s.165?
Qualifying assets include assets used in a trade carried on by the donor or their personal company, shares or securities in a trading company (unlisted, or listed personal company), and agricultural property. Purely investment assets and residential property not used in a business generally do not qualify.
Can holdover relief be claimed on residential property gifts?
Not under s.165 for standard residential property. Holdover under s.260 may apply if the gift triggers an IHT charge, such as a transfer into a discretionary trust. Pure gifts of residential property to individuals are not eligible for holdover relief.
What is the recipient's base cost after holdover relief?
The recipient's base cost equals the market value of the asset at the date of gift minus the gain held over. If the full gain is held over, the recipient acquires at the donor's effective original cost. When the recipient sells, their gain is calculated from this reduced base cost.
What happens if some consideration is received?
If consideration received exceeds the original cost, the excess is immediately chargeable to the donor. The remaining gain (total gain minus chargeable element) can be held over. If consideration is at or below original cost, no immediate charge arises and the full gain can be held over.
Does holdover relief interact with inheritance tax?
Yes. For potentially exempt transfers (PETs), holdover relief under s.165 can apply to qualifying business assets. For immediately chargeable transfers (such as gifts into discretionary trusts), s.260 holdover applies and is broader. Good estate planning considers both CGT and IHT implications together.
Is holdover relief automatic?
No. Both donor and recipient must jointly elect for holdover relief, typically using Form HS295 or within Self Assessment returns. The election must be made within four years of the end of the tax year of the gift.
Can holdover relief and BADR both apply?
Not to the same gain simultaneously. Holdover defers the gain. If the recipient later qualifies for BADR when they sell, they can claim it at that disposal event. The relief applies at different points in time.
What CGT rate does the recipient pay when they sell?
The recipient pays CGT at their own applicable rate at the time of their disposal. For most assets in 2025/26 this is 18% (basic rate) or 24% (higher rate). If they qualify for BADR, the rate may be 10%.
What is holdover relief under s.260?
Section 260 holdover applies where a gift is immediately chargeable to IHT, such as a transfer into a discretionary trust. Unlike s.165, it can cover any asset. Where both provisions could apply, s.260 takes precedence.
Does holdover relief apply to gifts to children?
Yes, s.165 can apply to gifts to any recipient — children, family members, or unrelated parties — as long as the asset qualifies. There is no relationship restriction under s.165 itself, though IHT and other implications should be reviewed.
Can companies claim holdover relief?
Holdover relief under s.165 applies to individuals and trustees, not to companies. Companies are subject to corporation tax on gains and have different deferral mechanisms. If a company gifts an asset, the transaction is typically at market value for corporation tax purposes.