If you’re a business owner considering passing your company shares down to your children, you’re not alone. It’s a common idea — especially in family-run businesses — to want to “keep it in the family.”

But here’s the catch: you could end up with a six-figure tax bill if you don’t do it properly.

Let’s break down what really happens when you gift shares to your children — and how to avoid getting burned by capital gains tax (CGT) in the process.

The Big Mistake: Thinking It’s Just a Simple Transfer

Transferring shares to your kids might feel like a personal family decision — but to HMRC, it’s a taxable event.

Unlike transferring shares to a spouse (which is tax-neutral), gifting shares to children is treated as if you sold them at market value, even if no money changes hands.

That means HMRC sees a gain — and they want their slice.

What Does That Mean in Practice?

Let’s say:

• You started your business from scratch.
• It’s now worth £1 million.
• You gift 50% of the shares to your son.

That’s a £500,000 capital gain in HMRC’s eyes — even though you didn’t sell anything. Depending on your tax rate, that could mean a £100,000+ capital gains tax bill, payable by you, not your child.

Ouch.

Gift Holdover Relief: A Lifeline for Family Transfers

There is one powerful tool you can use to reduce or delay the CGT hit: Gift Holdover Relief.

What is it?

Gift Holdover Relief allows you to postpone paying capital gains tax when gifting shares in certain qualifying businesses. Instead of paying tax now, the gain is passed onto the recipient (your child), who will pay CGT if and when they sell the shares in the future.

Think of it as a future tax IOU that travels with the gift.

When Can You Use Gift Holdover Relief?

✅ You’re gifting shares in a personal trading company (not an investment or property company).
✅ The gift is made for no payment or below market value.
✅ Both parties complete form HS295 and submit it with their self-assessment tax return.

⚠️ Important: This is not automatic — you must apply for the relief. And if HMRC decides your company isn’t eligible (e.g. it’s more of an investment vehicle), relief could be denied.

Why It’s Worth Getting Advice First

This kind of transaction can involve complex valuations, capital gains tax traps, and major retirement implications.

Imagine: you’ve spent 30 years building your business. You plan to retire, transfer shares to your children — and suddenly get slapped with a £200,000 tax bill. Your retirement plan? Delayed. Your stress levels? Sky-high.

Don’t let poor planning steal your future.