Succession planning is a cornerstone of long-term business strategy, and Gift Holdover Relief is often the engine that makes it possible. Following the recent Budget, the government has announced a “modernisation” of this relief set for 2026.
While the term “modernisation” is used, the reality is a long-awaited correction of an anomaly that has existed for over 20 years. Here is what you need to know to protect your business succession plans.
What is Gift Holdover Relief?
When you gift shares in a trading company, you are technically making a disposal for Capital Gains Tax (CGT) purposes. Gift Holdover Relief allows the donor and the recipient to “hold over” that gain. Instead of paying tax now, the tax is deferred until the recipient eventually sells the shares.
This is vital for family businesses, as it allows the next generation to take over without the outgoing owners facing an immediate tax bill where no cash was actually received.
The Current Problem: The 2002 Anomaly
Currently, the relief is restricted if the company holds non-business assets (like investment properties). The formula to calculate this restriction depends on the value of “chargeable business assets.”
The issue lies in how Goodwill and Intangible Assets are treated:
- Pre-2002: Goodwill created before April 2002 is a “chargeable asset” and counts toward the relief.
- Post-2002: Intangible assets created after this date fall under a different tax regime and are not currently considered chargeable assets.
The result? Two identical companies could be treated differently. An older company incorporated in 1998 might get full relief, while a modern company founded in 2005—with the exact same asset profile—might face a heavy tax bill because its goodwill “doesn’t count” in the current formula.
What is Changing in 2026?
Starting in 2026, the government will update the restriction formula to include assets within the Intangible Fixed Assets regime and those qualifying for the Substantial Shareholding Exemption.
This levels the playing field, ensuring that modern businesses aren’t unfairly penalised for having intangible value (like brands, software, or goodwill) created after 2002.
Action Points: Timing Your Gift
If you are planning to gift shares in a company with significant post-2002 intangible assets and some non-business investments, patience could save you a significant amount in CGT.
- Gifting now: You may face a restricted relief claim and a high immediate tax bill.
- Gifting in 2026: You may benefit from the updated formula, potentially allowing for a much larger portion of the gain to be held over.
Disclaimer
This newsletter is intended for general information purposes only and does not constitute professional tax, legal, or financial advice. Tax laws are subject to change and their application can vary widely based on specific facts and circumstances. You should not act upon the information contained in this newsletter without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication.
