We’ll explain plainly how lifetime transfers can protect both wealth and the business. Lifetime gifts can help with estate planning, but they may bring Capital Gains Tax now and Inheritance Tax later. Timing and structure matter.
One clear route is an outright transfer. Another is using a trust. Each path changes tax, control and family dynamics. We will flag the recent rule change that limits Business Relief to £1 million per person from 6 April 2026 and say why that shifts what looks tax-efficient.
We set expectations early: even a gift can have consequences. Good planning covers taxes, control and family harmony. We use simple examples — such as a trading business paying dividends for university fees or a firm likely to be sold soon — so you can see practical outcomes.
By the end you’ll have a short checklist to bring to your accountant or solicitor. That checklist helps make decisions based on facts, not guesswork.
Key Takeaways
- Lifetime transfers can aid estate planning but may trigger CGT and IHT.
- There are two main options: outright transfer or trust, each with pros and cons.
- Planned Business Relief limits from April 2026 may change the best approach.
- Good plans balance tax savings with control and family stability.
- Bring a clear checklist and examples to your adviser for practical next steps.
Why gifting shares to children can be a smart family business and estate planning move
Passing part of a business on during your lifetime can lock in reliefs and smooth succession. We often see that early action makes tax and control choices clearer. It also helps bring younger family members into the business without losing overall stewardship.
Succession and keeping control
We explain how gradual transfers fit into succession planning. You can move value to working family members while keeping voting control with founders.
Supporting loved ones while managing tax
Useful transfers can fund education, homes or new ventures now. This reduces pressure on the estate later and may lower Inheritance Tax exposure for others.
When lifetime transfers beat leaving assets on death
Leaving everything to pass on death can give beneficiaries a capital gains uplift. But acting early can lock in Business Relief where it still applies.
- Timing matters if the business shifts from trading to investment.
- We recommend reviewing plans if a sale or cash-heavy strategy is likely soon.
- Simple example: parents transfer gradual value to children who work, then balance inheritances with other assets for non-working family members.
For related guidance on inheritance planning and transfers, see our inheritance tax guide.
Check your company rules before you transfer any shares
Don’t assume you can transfer ownership — the company’s own documents usually set the limits. We always start by reading the articles of association and any shareholder agreement. These papers often decide whether a transfer is permitted and under what conditions.
What to review in the articles and any agreement
Look for pre-emption rights, board consent rules and permitted transferees. These clauses can stop a transfer before you begin. Ask your adviser for copies and highlight any approval steps.
Share class matters
Ordinary shares often carry voting rights. Preference shares usually give dividend priority. Convertible and redeemable share classes may add extra strings. The class can affect whether a transfer needs approval.
Practical restrictions and age limits
Some firms bar under-18s as shareholders because of contract capacity. Also check for compulsory transfer clauses on leaving employment or sale triggers. Spotting these early saves time and protects company property.
- Read the governing documents first.
- Check who must approve and what conditions apply.
- Avoid altering control before governance is agreed.
Choose the right gifting route: outright gift versus a shares trust
An early choice about transfer method can protect value and limit exposure to outside claims.
Outright transfers are simple. The recipient owns the assets and can vote. But that also means the shares can form part of a divorce settlement or be seized by creditors. An outright gift places the holding into the beneficiary’s estate and gives them full control immediately.
Trusts offer protection and control. Trustees hold legal power and can manage voting and dividend policy for the beneficiaries’ benefit. That helps prevent ownership splintering and reduces family conflict. A well-drafted shares trust keeps decisions steady while still supporting loved ones.
Life interest trusts and practical compliance
Life interest trusts are a common middle way. They let someone enjoy dividends while capital stays safeguarded for later beneficiaries. They suit parents who want income for a child but protection until the child is older or proven in the business.
Trusts do carry ongoing duties. Many must be listed on the Trust Registration Service and may need tax returns. Trustees must keep records and meet compliance deadlines. That administration is manageable, but it matters for estate planning choices.
For a simple primer on placing assets into trust, see our guide on putting an asset into a trust.
How to transfer shares to children in the UK: the legal process step-by-step
We set out a simple step-by-step route so the legal transfer feels straightforward. Below we cover the paperwork, company approval and the stamp duty practicalities.
Documents you typically need
Start with these core papers.
- Completed stock transfer form and any purchase memorandum.
- Existing share certificate(s) showing current ownership.
- Board minutes or a written resolution approving the move where the articles require it.
- Updates to the statutory register of members after registration.
When the transfer becomes effective
The transfer is not complete the moment signatures are exchanged. It only becomes effective once the company has approved (if required) and the new owner is entered on the register of members.
Stamp duty basics
Stamp duty on transfers is usually 0.5% of the consideration payable, rounded up to the nearest £5. It does not apply to true gifts. No duty is due where consideration is under £1,000, including many connected transfers.
| Step | Key paper | When it happens |
|---|---|---|
| Agree terms | Sale or gift note | Before signatures |
| Complete form | Stock transfer form | At signing |
| Company approval & registration | Board minutes & update register | Before transfer is effective |
We recommend documenting any gift clearly and seeking professional help where share classes, restrictions or future sale plans complicate the process. For related guidance on accessing trust assets, see our how to access a trust fund.
Inheritance Tax implications of gifting shares and the seven-year rule
Surviving the critical seven-year period often determines if inheritance tax applies on death.
Potentially Exempt Transfers (PETs) are gifts to an individual that create no immediate inheritance tax charge. If the donor lives for seven years after the date, the transfer usually falls outside the estate.
Gifts placed into trust
Transfers into trust can trigger an entry charge. Trustees often manage this by using the nil-rate band and seeking applicable relief such as Business Relief where available.
If the donor dies within seven years
Death within the seven years can bring a full IHT bill. Clawback rules may apply, especially where the recipient no longer holds the asset or where reservation of benefit is suspected.
- Taper relief reduces tax on transfers that failed to survive the seven years.
- Annual exemptions (for example the £3,000 allowance) can lower the taxable sum, but valuation still matters.
- Avoid reservation of benefit: keep commercial terms and remuneration justifiable.
| Situation | Likely IHT result | Common action |
|---|---|---|
| PET and survive seven years | No IHT on death | Document dates and retain proof |
| PET and die within seven years | IHT applies; taper may reduce | Check for taper relief and value timing |
| Transfer into trust | Possible entry charge (up to 20%) | Use nil-rate band or Business Relief where valid |
Practical point: Proper paperwork and commercial behaviour make problems rare. We recommend checking dates, valuations and trustee records with your adviser.
Business Relief and the changing rules for family businesses in the present UK tax landscape
Securing Business Relief early can preserve value that later growth would otherwise expose to heavier tax.
Why 100% relief matters. Qualifying trading company holdings can attract full relief from Inheritance Tax. That means the relevant assets may pass without IHT if conditions are met.
Budget change and the practical impact
The October 2024 Budget announced a cap: relief will be limited to £1 million per person for transfers after 6 April 2026. This makes timing critical for those who expect growth over the next few years.
When relief may be at risk
Relief can fail where the business drifts from trading towards investment. Holding high cash, rental property or quoted investments can trigger loss of relief and raise your tax burden.
Practical planning points
- Consider early lifetime transfers to lock in relief on current value.
- Review plans if a sale, liquidation or cash extraction is likely soon.
- Where helpful, spread ownership to use multiple allowances without losing control.
“Acting now may reduce long‑term tax burden and protect the business legacy.”
For an urgent review of your position, take action with your adviser.
Capital Gains Tax on gifting shares: how hold-over relief can reduce the immediate bill
When ownership changes, HMRC treats the event like a disposal for capital gains tax purposes. That means a gift can trigger a liability based on market value even if no money moves.
How hold-over relief works
Hold-over relief lets you defer the capital gains that would otherwise arise. The recipient (or trustees) inherits the donor’s base cost. The gain is pushed forward and only crystallises on a later disposal.
Who usually qualifies
Relief commonly applies to gifts of unquoted trading company shares to individuals. But relief can be limited where the business holds significant non-business assets.
Trust transfers and practical points
Transfers into trust can also get deferral. The trust rules are technical. Who may benefit matters: some appointments, or potential beneficiaries, can stop relief.
- Watch for non-trading assets inside the group—these can restrict relief.
- Weigh CGT vs IHT: lifetime gifts can save inheritance tax but lose the death uplift on gains.
- Example: transfer some equity now to working children while deferring gains so no forced sale is needed.
We recommend checking valuations and trust terms with your adviser before any transfer.
Business Asset Disposal Relief and future sale planning for children and family members
Knowing how relief works for qualifying disposals can reshape your sale strategy.
BADR currently gives a 10% rate on qualifying gains up to a £1 million lifetime allowance per person. That cap makes early planning useful where growth is expected.
Legislated rises mean the rate goes to 14% from 6 April 2025 and 18% from 6 April 2026. Factor these changes into timing and who holds the stock.
Key qualifying points
- Work and ownership tests often matter. Meeting the 5% ordinary shareholding and voting rights tests is critical.
- Trusts can hold interests, but the trust must meet relevant tests for the relief to apply.
- Hold-over relief on a lifetime gift does not automatically block a later BADR claim by the recipient or trustees if conditions are satisfied.
What could go wrong: transfer too little, or the wrong share class, and you may fail the 5% tests. That can reduce the relief available at sale and lower overall value for those family members.
For practical steps on such transfers, see our guide on what to consider when giving away.
Protecting the family: control, beneficiary outcomes and common risks to manage
Protecting relationships matters more than maximising tax gains when your aim is long‑term stewardship. We focus on the human side: fair outcomes, clear rules and realistic governance.
Preventing disputes between working members and those who are not
Resentment is common when effort and reward do not match. A written agreement on dividends and roles eases tensions.
Use clear job descriptions, staged ownership and documented dividend policies. That gives non‑executive members certainty and working members recognition.
Managing loss of control and trustee decision‑making
A well‑set trust can centralise voting with trustees and avoid fragmented voting by many small holders.
Trustees should include independent advisers. They must act for each beneficiary’s best interests and keep records.
Protecting holdings from divorce, creditors and vulnerable beneficiary issues
Outright transfers risk claims in a divorce or bankruptcy. Using a trust structure can shield assets and keep decisions consistent.
For vulnerable beneficiaries, appoint guardians and build clear succession rules into the shareholder agreement.
“Good governance protects both the business and the people who depend on it.”
- Document intentions early and keep them updated.
- Set reserved matters and special share classes for control.
- Agree what happens if someone leaves employment or faces financial trouble.
Conclusion
A clear plan lets you balance tax savings with long‑term protection. We must choose whether an outright transfer or a trust gives the right mix of control, protection and simplicity for your shares and children.
Check the main tax pillars before you act. Think about inheritance tax and the seven‑year rule. Consider capital gains timing and whether hold‑over relief applies. Factor in the planned Business Relief cap and rising BADR rates when you set timing.
Follow the practical steps: review company rules, get paperwork in order, seek board approval and update the register. Stamp duty rarely applies to true gifts, but confirm the point.
Sensible next steps: confirm share class and restrictions, get a current valuation, stress‑test relief eligibility and map likely sale dates. Treat this as estate planning, not a one‑off. Done carefully, a lifetime transfer can protect property and business value for the next generation and keep tax outcomes predictable.