The decision: give the investment or keep it?
This guide is for UK families considering an outright gift of personally held investments to an adult child. It uses ordinary listed shares held outside an ISA or pension, with no business relief or other special treatment assumed. A trust, private trading-company shares or an overseas estate can change the analysis. The rules were checked on 11 November 2026.
A gift can trigger tax without raising cash
Section 17 of the Taxation of Chargeable Gains Act 1992 normally substitutes market value for what you receive when you give an asset away. Reconstruct the allowable acquisition cost and, for shares bought in tranches, check which costs are matched to the holding. Compare the gain after any allowable losses and available annual exemption. Budget for any CGT from other funds because the gift itself provides no sale proceeds.
Gift Hold-Over Relief has separate statutory conditions. Do not assume an ordinary investment holding qualifies simply because the transfer is a family gift. If a qualifying relief does apply, the recipient’s acquisition cost may be reduced; a deferred gain has not disappeared.
The seven-year rule only answers the IHT question
An outright gift from an individual to another individual is generally a potentially exempt transfer under section 3A of the Inheritance Tax Act 1984 to the extent it is not already exempt. If the donor survives seven years, the transfer normally becomes exempt. If they die sooner, review the gift with other transfers, the available nil-rate band and any taper relief that applies to tax on the gift. Surviving seven years does not reverse any CGT on the original transfer.
If the donor retains a benefit, for example by keeping the right to receive dividends from shares supposedly given away, the gift-with-reservation rules in section 102 of Finance Act 1986 can apply. The asset can remain within the IHT estate even after seven years. Check the rights actually transferred and who will receive the investment income before signing.
Keeping the investment changes the CGT starting point
Where section 62 applies, death itself is not a CGT disposal and the asset generally passes at its market value on the date of death for CGT purposes. A later disposal by the estate or beneficiary can still produce a gain or loss measured from that value. Keeping the asset means its value remains part of the IHT analysis; a new CGT base cost does not make the estate exempt from IHT.
Hypothetical comparison: the same holding, two routes
Assume a shareholding worth £300,000 cost £120,000. Ignore costs, losses, allowances and reliefs. A lifetime gift produces a £180,000 gain before allowances. The recipient generally starts with a £300,000 CGT cost. If the donor survives seven years after a genuine outright gift with no retained benefit, the gift generally falls outside IHT, but the £180,000 gain has already arisen.
If the donor instead keeps the holding and it is worth £340,000 on death, there is normally no CGT disposal on death. The £340,000 goes into the IHT estate calculation and is generally the new CGT base cost. A later sale at £350,000 would give a £10,000 gain before adjustments. These figures illustrate tax bases, not liabilities or a forecast of savings. Which route leaves more for the family depends on the whole estate and the donor’s needs.
Compare cash needs before instructing the transfer
Build a schedule of ownership, base costs, valuations and previous gifts. Forecast the donor’s spending and investment income after a gift, and establish who will fund any CGT. Compare keeping the holding, gifting part of it, or selling and gifting cash. A sale to fund a cash gift can itself trigger CGT. If you proceed, agree the legal transfer, reporting and records with your advisers and revisit the plan after a material change in health, finances or ownership.
UA Tax advises families in London and across the UK. Book a Tax Consultation to compare the CGT, IHT and cash consequences before making a material gift.
For advice on your own circumstances, see our Inheritance Tax planning service and agree the scope before acting.
Official sources and further reading
These primary sources support the framework above. Check the current version before acting because tax law and HMRC guidance can change.