Gifts and Capital Gains Tax
Gifts and Capital Gains Tax
Giving an asset away can still trigger Capital Gains Tax. If you gift property, shares or another valuable asset, HMRC may treat the transfer as a disposal at its current market value — even though no money changes hands.
Gifting an asset does not automatically avoid Capital Gains Tax. For UK tax purposes, giving away property, shares or another chargeable asset can be treated as a disposal even though you receive no money. In many cases, the gain is calculated using the asset's market value on the date of the gift.
Do you pay Capital Gains Tax when you give something away?
Potentially, yes. If you give an asset to another person, Capital Gains Tax (CGT) can arise on the increase in value since you acquired it. Special rules apply to transfers between spouses and civil partners, gifts to charities and certain gifts of business assets. The tax position therefore depends on what you give away, who receives it, what it is worth and which CGT reliefs apply.
Gifts and Capital Gains Tax: the basic rule
Capital Gains Tax normally applies when you dispose of a chargeable asset. A disposal does not have to involve a conventional sale. Giving an asset away can also constitute a disposal for CGT purposes.
This matters because HMRC may use the asset's market value when calculating the disposal. You cannot necessarily avoid CGT simply by transferring an asset for nothing or selling it to a family member for a nominal amount.
Who are you giving the asset to?
The identity of the recipient can completely change the Capital Gains Tax treatment of a gift.
| Recipient | Typical CGT treatment | Value normally used | Important point |
|---|---|---|---|
| Spouse or civil partner | Normally no immediate gain or loss | Special no-gain/no-loss rules | The recipient generally takes over the donor's historic CGT cost. |
| Child or other family member | A taxable disposal may arise | Market value | No money needs to change hands for a gain to arise. |
| Friend or another individual | A taxable disposal may arise | Market value may apply to a gift | The fact that the recipient pays nothing does not automatically remove CGT. |
| Charity | Normally favourable CGT treatment | Special rules apply | Gifts of assets to qualifying charities are generally exempt from CGT. |
| Trust | Potential CGT disposal | Usually market value | Gift Hold-Over Relief may sometimes defer the gain, subject to qualifying conditions. |
Capital Gains Tax when gifting property to a child
One of the most common questions is whether parents can give a property to their son or daughter without paying Capital Gains Tax.
If you gift an investment property, second home or buy-to-let to your child, the transfer will normally be treated for CGT purposes by reference to its market value at the date of the gift. This can create a significant taxable gain even though your child pays you nothing.
Suppose you purchased a buy-to-let property for £150,000 and it is worth £300,000 when you give it to your daughter.
The starting gain is therefore £150,000 even though you have received £0 from your daughter. Allowable acquisition and disposal costs, qualifying capital improvements, available losses, the Annual Exempt Amount and any applicable reliefs would then need to be considered.
How is Capital Gains Tax calculated on a gift?
The calculation is broadly similar to a normal disposal, except that the relevant market value may replace the amount you would normally receive from selling the asset.
Determine the open market value of the asset at the date it is gifted where the market-value rules apply.
This will commonly include the original purchase price together with qualifying incidental acquisition costs.
Certain enhancement expenditure may be deductible. Ordinary repairs and maintenance are not automatically capital expenditure for CGT.
Deduct the allowable costs from the relevant disposal value.
Consider allowable capital losses and reliefs such as Private Residence Relief or Gift Hold-Over Relief where applicable.
For an individual, the CGT Annual Exempt Amount is £3,000 for the 2026/27 tax year.
For 2026/27, the main individual CGT rates are 18% and 24%. The rate applying to a particular gain depends on the individual's taxable income and gains.
Worked example: Capital Gains Tax on a property gift
Assume a landlord gives a rental property to an adult child during 2026/27.
If the whole taxable gain fell within the 24% CGT rate, the illustrative CGT liability would be £30,000. In practice, the calculation depends on the donor's taxable income, other gains and losses, allowable expenditure and any available reliefs.
Do I pay Capital Gains Tax if I gift property to my spouse?
Transfers between spouses and civil partners who are living together are normally made on a no-gain/no-loss basis. This generally means that the person making the transfer does not pay CGT at that point.
This does not necessarily eliminate the gain permanently. Broadly, the recipient spouse or civil partner takes over the transferring spouse's historic CGT position, which can affect the gain when the asset is eventually disposed of.
You purchased an investment property for £200,000. It is worth £350,000 when transferred to your spouse while you are living together.
There would normally be no immediate CGT charge on the transfer. If your spouse subsequently disposes of the property, however, the historic acquisition cost will normally remain relevant when calculating the eventual gain.
Different rules can apply following separation, so transfers made as part of a divorce or separation should be considered separately.
Can I gift my main home to my children without CGT?
Possibly. If the property has genuinely been your only or main residence throughout the relevant period of ownership, Private Residence Relief may exempt some or all of the gain.
The position can become more complicated where the property has been rented out, used for business, occupied as a main residence for only part of the ownership period, or where part of the property has not qualified for Private Residence Relief.
What is Gift Hold-Over Relief?
Gift Hold-Over Relief can defer Capital Gains Tax on certain qualifying gifts. Instead of the donor paying CGT immediately, the gain is effectively postponed and reflected in the recipient's CGT position.
The relief can be particularly important when transferring qualifying business assets or certain shares. It may also be relevant to some transfers involving trusts, although the interaction between CGT and Inheritance Tax requires careful consideration.
Without Hold-Over Relief
The donor may be treated as disposing of the asset at market value and could face an immediate CGT liability.
With Hold-Over Relief
The qualifying gain is deferred rather than simply disappearing. This normally reduces the recipient's effective CGT base cost, potentially increasing the gain when they later dispose of the asset.
Gift Hold-Over Relief is therefore a tax deferral mechanism rather than necessarily a permanent CGT exemption.
Can I avoid CGT by selling an asset to my child for £1?
No. Transferring an asset to a connected person for a nominal amount does not normally restrict the CGT calculation to the amount actually paid.
For example, if you transfer a property worth £400,000 to your child for £1, the relevant CGT rules can treat the disposal by reference to the property's market value rather than the £1 consideration.
This is one reason why obtaining a credible valuation at the date of a substantial gift can be extremely important.
Do gifts to charity attract Capital Gains Tax?
Gifts of assets to qualifying charities are generally treated favourably for Capital Gains Tax purposes and will commonly be exempt from CGT.
Special rules can apply where an asset is sold to a charity rather than simply donated, particularly where the charity pays more than the donor originally paid but less than full market value.
Gifting shares and Capital Gains Tax
Giving shares to another person can also constitute a disposal for CGT purposes. Where the shares have risen in value, the donor may therefore realise a taxable gain despite receiving no cash.
The position can be very different where the shares qualify for Gift Hold-Over Relief. For example, qualifying shares in certain trading companies may allow some or all of the gain to be deferred, subject to the statutory conditions.
Anyone considering gifting shares in a family or owner-managed company should therefore review the CGT position before the shares are transferred.
Capital Gains Tax rates on gifts in 2026/27
There is not a separate CGT rate simply because an asset has been gifted. Once the taxable gain has been established, the normal applicable CGT rules determine the rate.
| 2026/27 | Rate / allowance | What it means |
|---|---|---|
| Annual Exempt Amount | £3,000 | Annual CGT exemption for most individuals, subject to the applicable rules. |
| Lower main individual CGT rate | 18% | May apply where the taxable gain falls within the available basic-rate band. |
| Higher main individual CGT rate | 24% | Applies to taxable gains falling above the relevant basic-rate band. |
| Business Asset Disposal Relief rate | 18% | Applies from 6 April 2026 to qualifying gains meeting the BADR conditions. |
Tax rates and allowances can change. The figures above relate to the 2026/27 tax year.
Gifts, Capital Gains Tax and Inheritance Tax
Capital Gains Tax and Inheritance Tax are separate taxes, and a gift can have consequences for both.
A lifetime gift to another individual may be a Potentially Exempt Transfer for Inheritance Tax, whereas CGT can potentially arise immediately when the asset is given away. This creates an important distinction: the fact that a gift may eventually fall outside your estate for IHT purposes does not mean that the gift is automatically free from CGT.
IHT asks: how does the transfer affect the value of your estate and the relevant lifetime gift rules?
A substantial gift should therefore normally be considered for both taxes rather than looking at CGT or IHT in isolation.
Do I need a valuation when gifting an asset?
A reliable valuation can be particularly important when gifting property, private company shares or another asset for which there is no obvious quoted market price.
The valuation establishes the amount potentially used in the donor's CGT calculation and may also establish the recipient's acquisition value where the normal market-value rules apply.
For a significant property or business transfer, contemporaneous evidence supporting the valuation can be valuable if HMRC subsequently queries the tax return.
When must Capital Gains Tax on a property gift be reported?
Where a gift constitutes a disposal of UK residential property and CGT is payable, the UK property CGT reporting rules can require the disposal to be reported and the estimated tax paid within 60 days of completion.
Depending on the circumstances, the disposal may also need to be reflected in Self Assessment.
What records should you keep when making a gift?
Good records make it much easier to calculate and support the eventual Capital Gains Tax position. Depending on the asset, useful records can include:
Original acquisition
Purchase contracts, completion statements, original valuations and evidence of acquisition costs.
Capital expenditure
Invoices and supporting evidence for qualifying improvements or enhancement expenditure.
Gift-date valuation
Professional valuations and evidence supporting the market value used at the date of transfer.
Reliefs and tax filings
Calculations, elections, relief claims, CGT property returns and relevant Self Assessment records.
Before gifting property, shares or other valuable assets
The best time to calculate the tax consequences is generally before the ownership of the asset changes. Once a gift has been completed, some planning opportunities may no longer be available.
The rules differ depending on whether you are transferring to a spouse, child, other individual, charity or trust.
Calculate the potential gain before completing the transfer.
Consider Private Residence Relief, Gift Hold-Over Relief and other relevant CGT provisions.
Review Inheritance Tax and any other taxes or transaction costs that could arise alongside CGT.
In particular, do not overlook the 60-day rules that can apply where CGT is payable following a disposal of UK residential property.
Frequently asked questions about gifts and Capital Gains Tax
Do you pay Capital Gains Tax on a gift?
You can. Giving away a chargeable asset can count as a disposal for Capital Gains Tax purposes. Where the market-value rules apply, the gain can be calculated using the asset's market value even though you received no payment.
Do I pay Capital Gains Tax if I give my house to my child?
Potentially. If the property has increased in value, gifting it to your child can trigger CGT based on its market value. If it has qualified as your main residence, Private Residence Relief may reduce or eliminate the gain, depending on the circumstances.
Can I gift a property to my spouse without paying CGT?
Transfers between spouses and civil partners who are living together are normally made on a no-gain/no-loss basis, meaning there is generally no immediate CGT liability. The historic gain can effectively carry over to the recipient.
What happens if I give a buy-to-let property to my children?
The gift will normally be treated as a disposal by reference to market value for CGT purposes. A taxable gain can therefore arise even though your children pay you nothing.
Can I sell my house to my son or daughter for £1?
You can legally transfer property for less than market value in appropriate circumstances, but using a nominal price does not necessarily reduce the CGT calculation. Transfers to connected persons can be subject to the market-value rules.
Who pays Capital Gains Tax when an asset is gifted?
Where an immediate taxable gain arises, it is normally the person disposing of or gifting the asset who has the CGT liability. The recipient's acquisition position then affects the calculation when they later dispose of the asset.
Does the person receiving a gift pay CGT immediately?
Normally CGT is concerned with the disposal made by the donor rather than simply receiving an asset. The recipient may subsequently have a CGT liability when they dispose of the asset themselves.
What is Gift Hold-Over Relief?
Gift Hold-Over Relief can defer the capital gain on certain qualifying gifts, including some business assets and shares. The deferred gain is effectively reflected in the recipient's CGT position rather than being taxed immediately on the donor.
Is gifting money subject to Capital Gains Tax?
Giving cash itself does not normally generate a capital gain because cash has not appreciated in the way that property, shares or other investments can. Other taxes, particularly Inheritance Tax, may still need to be considered.
Is there a £3,000 limit on gifts for Capital Gains Tax?
No. The £3,000 CGT Annual Exempt Amount for 2026/27 relates to an individual's net taxable capital gains, not the market value of assets they are allowed to give away. It should not be confused with separate Inheritance Tax gift exemptions.
Can I gift shares without paying Capital Gains Tax?
It depends on the shares and the circumstances. A gift of shares can create a taxable disposal, but qualifying business shares may potentially qualify for Gift Hold-Over Relief.
Does the seven-year rule mean there is no Capital Gains Tax?
No. The well-known seven-year rule relates primarily to Inheritance Tax treatment of certain lifetime gifts. It does not provide a seven-year exemption from Capital Gains Tax.
How quickly must CGT on a gifted residential property be reported?
Where CGT is payable on a disposal of UK residential property, a 60-day reporting and payment deadline can apply. The precise reporting requirements should be checked for the particular disposal.
Need help calculating Capital Gains Tax on a gift?
If you are planning to gift a property, shares or another valuable asset, The Online Accountants can help you calculate the potential capital gain, consider available reliefs and deal with the relevant tax reporting requirements.
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