Capital Gains Tax when you give away an asset

Giving something away is not a way to sidestep Capital Gains Tax. Capital Gains Tax is a tax on the profit when you sell something that has increased in value, and the tax rules treat a gift as a disposal, so handing an asset to someone can create a bill even though no money changes hands¹. If you give an asset to someone, you may have to pay capital gains tax, as you are disposing of something².

The gain is not measured by what you originally paid. Where a sale is between connected persons, for example a brother and sister, the value used is the market value of the policy³. That principle runs through gifts generally: the asset is treated as changing hands at what it is worth on the day, not at the price you paid for it years ago.

Some gifts escape the tax altogether. You do not usually need to pay tax on gifts to your husband, wife, civil partner or a charity⁴. For everything else, the question is what you gave away, what it was worth, and whether a relief covers it.

Giving something away counts as a disposal

The starting point is that a disposal happens when you give an asset to someone, and a gift includes selling something for less than its market value². The tax is not triggered by money changing hands; it is triggered by ownership changing hands. That is why a gift can produce a tax bill at a moment when nobody has received a penny.

Capital Gains Tax is a tax on capital gains: if when you sell or give away an asset it has increased in value, the profit may be taxable¹. The tax applies if you made a profit on selling or disposing of certain assets, such as shares or a second home⁷.

Two features of the system catch people out. First, you do not get a bill for Capital Gains Tax⁶. HMRC does not send one, so working out whether a gift has created a liability, and how much, is down to you. Second, how you report and pay depends on whether you sold a residential property in the UK⁸. A UK residential property disposal follows one route; most other assets follow another.

If you are selling a business, business assets or property, you could in some cases make a capital gain, so it is wise to get tax advice in this case⁹. Business assets can also attract relief: you may get tax relief if the property is a business asset¹⁰.

Market value, not the price paid, sets the gain on a gift

Because a gift is a disposal, the gain is worked out by comparing what the asset was worth when you gave it away with what it cost you to acquire. The value used is market value. Where a sale is between connected persons, for example a brother and sister, the value used is the market value of the policy³. The same approach applies to a gift between connected people.

Valuation is not always straightforward. The Inheritance Tax rules value assets as if each item had been sold on the date the deceased died, at open market value, with asset values rounded down to the nearest pound and liabilities up to the nearest pound¹¹. That is the Inheritance Tax basis rather than the Capital Gains Tax basis, but it shows the shape of an open market valuation: what a willing buyer would pay on the day.

Where an asset was itself received as a gift, the starting value for a later sale is the value at the date it was given, not the date of anyone's death. If you sell the property, the CGT you owe will be based on the increase in value between the date you were given the property, not the date of their death, and the date you sell it¹².

Gifts to a spouse, civil partner or charity: usually no tax

Transfers between spouses and civil partners sit outside the charge. You do not usually need to pay tax on gifts to your husband, wife, civil partner or a charity⁴. The same exemption appears across the guidance: tax is not normally due when transferring as a gift to your spouse, civil partner or charity¹⁴, gifts to a spouse, civil partner or charity are exempt from UK Capital Gains Tax¹⁵, and you do not usually pay CGT on gifts to your spouse or qualifying charities¹⁶.

The exemption is not unlimited in every circumstance. Where a couple is separating, the no gain, no loss treatment continues for a period: separating spouses or civil partners have up to 3 years, after the year they cease to live together, to make no gain or no loss transfers of assets¹⁰. The same window is described in the parallel guidance as up to 3 years, after the year they cease to live together¹⁷. After that window closes, a transfer between former partners is treated like any other disposal.

Charity gifts are treated generously across the tax system, not just for Capital Gains Tax. There is no Inheritance Tax to pay on estates left entirely to a spouse, civil partner or charity¹⁸, and anything left to a spouse or civil partner is usually exempt from Inheritance Tax, as is anything left to a charity¹⁹. A spouse or civil partner will never have to pay tax on assets left to them, regardless of the amount²⁰.

Which gifted assets can trigger tax: property, shares and possessions over £6,000

The assets that most often create a bill on a gift are property that is not your main home, shares, and valuable personal possessions.

For property, you may have to pay Capital Gains Tax if you make a profit when you sell property that is not your home, for example a buy to let, business property or inherited property²¹. The official list is similar: property that is not your home, for example buy-to-let properties, business premises, land, and inherited property¹⁰.

For possessions, the threshold is £6,000. You may have to pay Capital Gains Tax if you make a profit when you sell or dispose of a personal possession⁴, and you are exempt from paying tax on the first £6,000 of your share if you own a possession with other people⁴. Possessions that may need tax paid on them include jewellery, paintings, antiques, coins and stamps, and sets of things, like matching vases or chessmen⁴. One provider's guidance puts the personal possessions threshold at £3,000 or more, apart from your personal car¹⁶; the official figure is £6,000, and the two documents disagree on the level at which possessions become chargeable.

For shares, giving them to a family member is a disposal. There are specific rules for company takeovers: if the company taking over issues shares only, you do not pay Capital Gains Tax when you get the shares²². Where shares or securities in a non-UK company are received in exchange for shares or securities in a UK company, the measure deems them to be located in the UK for the purpose of Capital Gains Tax²³.

Selling for less than it is worth: when a sale is treated as a gift

A sale at an undervalue is treated as a gift for these purposes. A gift includes selling something for less than its market value². So a discounted sale to a family member is not a way to reduce the gain: the market value still sets the figure.

The same logic applies where the parties are connected. Where a sale is between connected persons, for example a brother and sister, the value used is the market value of the policy²⁴. Connected-person rules exist precisely to stop assets being moved at artificial prices.

Some assets that look like investments are taxed differently, which matters if you are thinking about giving one away. Chargeable event gains on life insurance policies are taxable as income rather than capital gains, so capital losses and the annual exempt amount cannot be set against them²⁴. The same point is made in the UK policies guidance: chargeable event gains are not capital gains, so capital losses and the annual exempt amount cannot be set against them³. Investment bond gains come under income tax, not capital gains tax, rules²⁵.

There is also a rule aimed at employment-related securities whose value has been inflated. Where the market value of your employment-related securities is increased by more than 10% at the relevant date by non-commercial actions, Income Tax is triggered¹¹.

Do I pay Capital Gains Tax when I sell something I inherited?

Yes. Capital Gains Tax applies when you sell anything you inherited⁵. For property, if the inherited property is not declared with HM Revenue & Customs as your main home, you will have to pay Capital Gains Tax on any profit you make when you sell it²⁶. Inherited property, money and shares can also bring other taxes, including Income Tax and Capital Gains Tax²⁷.

The estate itself has reporting duties. If you are selling property belonging to the estate of someone who has died, you need to include this information when reporting the estate to HMRC¹⁰. Where the asset was given to you during someone's lifetime rather than left by will, the starting value is the value on the date of the gift: if you sell the property, the CGT you owe will be based on the increase in value between the date you were given the property, not the date of their death, and the date you sell it¹².

How to report and pay

You do not get a bill for Capital Gains Tax⁶, so the calculation and the reporting are yours to handle. How you report and pay depends on whether you sold a residential property in the UK⁸. For UK residential property, the deadline is tighter than for other assets; for everything else, the tax is normally settled through Self Assessment.

For shares sold through a Share Incentive Plan, Capital Gains Tax is payable on 31 January after the end of the tax year in which the shares are sold²⁸. That date is a useful marker for the ordinary reporting cycle: the tax year ends, and the payment follows by the following 31 January.

If you are a non-UK resident, the position is narrower. You do not need to report or pay tax on anything else that has increased in value, beyond UK property or land⁸.

Rates and what could change

Rates on gains have moved recently. The rates on shares were increased on 30 October 2024, from the previous rates of 10% and 18% respectively²⁷. A separate rate applies to carried interest: 32% for individuals³⁰.

A Budget is due on 28 October 2026, and there are reported calls to raise Capital Gains Tax in line with income tax rates. Nothing is settled until a Budget announces it, and no confirmed future rates exist.

For anyone weighing up a gift, the practical points are these. The disposal happens when ownership moves, not when money moves. Market value sets the gain. Gifts to a spouse, civil partner or charity usually escape the charge, and separating couples keep the no gain, no loss treatment for up to 3 years after the year they cease to live together¹⁰. Personal possessions have a £6,000 threshold, and jointly owned possessions are exempt on the first £6,000 of your share⁴. Beyond that, the calculation, the reporting and the deadline are the giver's responsibility.