If you’ve built a successful family business, you might eventually want to pass some of it on to your children.
But there’s an obvious question:
If I give them some of my shares, am I going to be landed with a big tax bill?
Potentially not.
First up: Capital Gains Tax
Giving shares away counts as a disposal for Capital Gains Tax purposes. And annoyingly, HMRC doesn’t generally say: “Well, you didn’t actually receive any money, so we’ll forget about the tax.”
Instead, the shares are normally treated as being transferred at their market value. So if you started your company with shares worth £100 and they’re now worth £200,000, there could potentially be a sizeable capital gain – even though your child hasn’t paid you a penny.
But there’s something called Gift Hold-Over Relief
If the conditions are met, Gift Hold-Over Relief can postpone that Capital Gains Tax bill. Instead of you paying CGT when you give the shares away, the gain is effectively passed on with the shares. Your child may then pay Capital Gains Tax in the future if they eventually sell them. So it doesn’t necessarily make the gain disappear forever.
It moves the tax point from now to later.
For shares, this relief can commonly be available where the shares are in an unlisted trading company, which covers many owner-managed limited companies.
And then there’s Inheritance Tax…
This is another important bit of tax planning for business owners. Shares in a qualifying trading business can be eligible for Business Relief for Inheritance Tax purposes.
From April 2026, qualifying business assets can receive 100% Business Relief on up to £2.5 million of value.
Above that allowance, the qualifying value receives 50% relief.
So for many small family businesses, shares in the company could potentially pass on death with no Inheritance Tax at all on their value.
But there’s a BIG distinction
We’re talking about a genuine trading business.
Think:
✔️ Architects
✔️ IT Consultants
✔️ Marketing Agency
✔️ Engineering Business
✔️ Shop or Manufacturer
We’re generally not talking about a company mainly holding investments or property. So don’t assume that putting property into a limited company suddenly makes it qualify for Business Relief.
It doesn’t work like that.
So should you just give your shares to your kids?
Not necessarily!
Tax is only one part of the decision. Giving someone shares can also mean giving them ownership, rights to future value, and potentially voting or dividend rights.
And once you’ve given something away, changing your mind isn’t always quite so simple.
But if you’re starting to think about succession, retirement, or eventually passing your family business to the next generation, it’s absolutely worth discussing before you actually need to do it.
A bit of planning now could make a very big difference later.
Don’t wait until you’re reading to retire before thinking about what happens to your business. Your shares could be one of your biggest assets, so include them in your long-term planning.