Gift Hold-Over Relief defers the payment of Capital Gains Tax (CGT). It can be claimed when assets, including certain shares, are gifted or sold below their market value to benefit the buyer. The relief allows any gain on the asset to be 'held-over' until the recipient sells or disposes of it. This is achieved by reducing the recipient's acquisition cost by the amount of the held-over gain.

The person giving a qualifying asset is not liable for Capital Gains Tax (CGT) on the gift itself. However, CGT may be due if the asset is sold for less than its market value. Gifts between spouses and civil partners do not usually incur CGT. A claim for the relief must be made jointly with the person to whom the gift was made.

If you are giving away business assets you must:

• be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your 'personal company'); and
• use the assets in your business or personal company.

You can usually get partial relief if you used the assets only partly for your business.

If you are giving away shares, then the shares must be in a company that is either:

• not listed on any recognised stock exchange; or
• your personal company.

The company's main activities must be in trading, for example providing goods or services, rather than non-trading activities such as investment activities.

A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). In the Spring Budget 2024, the Chancellor announced a reduction in the higher rate that exists for residential property to 24% (from 28%) from 6 April 2024. These rates apply to higher rate taxpayers as well as to trustees and personal representatives. The lower rate that applies to basic rate taxpayers remain unchanged at 18% in the current 2024-25 tax year.

Most people are aware that they do not usually have to pay CGT when they sell their qualifying residential property used wholly as a main family residence. However other sales of property that are not a principle private residence (PPR) will be subject to CGT.

This includes:

• buy-to-let properties
• business premises
• land
• inherited property

The deadline for paying any CGT due on the sale of a residential property is 60 days. This means that a CGT return needs to be completed and a payment on account of any CGT due should be made within 60 days of the completion of the transaction. This applies to UK residents selling UK residential property where CGT is due. There are various reliefs available from CGT for the sale of qualifying business assets.

If you have tenants in your home there can be Capital Gains Tax (CGT) consequences. Generally, there is no Capital Gains Tax (CGT) on a property used as the main family residence, thanks to a relief known as Private Residence Relief (PRR).

However, where part of the home has been let out the entitlement to relief may be affected. Homeowners that let out part of their house may not benefit from the full PRR but can benefit from letting relief. Letting relief is only available to homeowners who live in their property and rent out a portion of it.

The maximum amount of letting relief due is the lesser of:

• £40,000
• the amount of PRR due
• the same amount as the chargeable gain they made while letting out part of their home

Worked example:

• You rent out a large bedroom to a tenant that comprises 10% of your home.
• You sell the property, making a gain of £75,000.
• You're entitled to PRR of £67,500 on the part used as your home (90% of the total £75,000 gain).
• The remaining gain on the part of your home that's been let is £7,500.

The maximum letting relief due is £7,500 as this is the lower of:

• £40,000
• £67,500 (the PRR due)
• £7,500 (the gain on the part of the property that's been let)

There's no Capital Gains Tax to pay – the gain of £75,000 is covered by the £67,500 PRR and the £7,500 letting relief.

You are not considered to be letting out your home if you have a lodger who shares living space with you or your children or parents live with you and pay you rent or housekeeping.

Where a taxpayer owns a business as a sole trader or in partnership, a capital gain will be deemed to arise if the business is converted into a company by reference to the market value of the business assets including goodwill. This could give rise to a chargeable gain based on the difference between the market value of the assets and their original cost.

However, in most cases the incorporation of the business will be done in such a way as to satisfy the conditions necessary to secure incorporation relief. One condition is that the entire business with the whole of its assets (or the whole of its assets other than cash) must be transferred as a going concern wholly or partly in exchange for shares in the new company.

It is important to note that where the necessary conditions are met, incorporation relief is given automatically and there is no need to make a claim. The relief works by reducing the base cost of the new assets by a proportion of the gain arising from the disposal of the old assets.

Although the relief is automatic it is possible to make an election in writing for incorporation relief not to apply. An election must be made before the second anniversary of 31 January next following the tax year in which the transfer took place e.g., an election in respect of a transfer made in the current 2024-25 tax year must be made by 31 January 2028. The election deadline is reduced by one year if the shares are disposed of in the year following that in which the business was incorporated.

The definition of a connected person for tax purposes varies.

A statutory definition of “connected persons” for Capital Gains Tax purposes is set out in Section 286 of the Taxation of Chargeable Gains Act (TCGA) 1992.

The legislation states:

" A person is connected with an individual if that person is the individual’s spouse or civil partner, or is a relative, or the spouse or civil partner of a relative, of the individual or of the individual’s spouse or civil partner"

In this context, ‘relative’ means brother, sister, ancestor or lineal descendant and spouses or civil partners of relatives. The term 'relative' does not cover all family relationships. In particular, it does not include nephews, nieces, uncles and aunts.

HMRC’s internal guidance on this definition also states that persons excluded are the widows or widowers, or surviving civil partners, of deceased persons, or relatives of a deceased spouse or of a deceased civil partner unless connection can be established by a route not involving the deceased. A dissolution of a civil partnership or a divorce can similarly lead to persons in addition to the former civil partner or spouse ceasing to be connected with the individual.

There are specials rules that apply to UK property sales by non-residents. Since 6 April 2020 non-residents have needed to report and pay any non-resident Capital Gains Tax (CGT) due if they have sold or disposed of:

• residential UK property or land (land for these purposes also includes any buildings on the land);
• non-residential UK property or land;
• mixed use UK property or land; or
• rights to assets that derive at least 75% of their value from UK land (indirect disposals).

A CGT charge on the sale of UK residential property by non-UK residents was introduced in April 2015. Only the amount of the overall gain relating to the period after 5 April 2015 is chargeable to tax.

A UK non-resident that sells UK residential property needs to deliver a non-resident CGT (NRCGT) return and pay any CGT within 60 days of selling a relevant property. The return must be made whether or not there is any NRCGT to be paid. Even if there is a loss on the disposal and where the taxpayer is due to report the disposal on their self-assessment tax return.

There are penalties for failing to file the NRCGT return within the deadline as well as for failing to pay any tax due on time.

Business Asset Rollover Relief also known as CGT Rollover Relief allows for deferral of Capital Gains Tax (CGT) on gains made when taxpayers sell or dispose of certain assets and use all or part of the proceeds to buy new business assets. The relief means that the tax on the gain of the old asset is postponed. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold.

Where only part of the proceeds from the sale of the old asset are used to buy a new asset a partial rollover claim can be made. It is also possible to claim for provisional rollover relief where the taxpayer expects to buy new assets but has not done so when the returns are made to HMRC. Interestingly, rollover relief can also be claimed if taxpayers use the proceeds from the sale of the old asset to improve assets they already own. The total amount of rollover relief is dependent on the total amount reinvested to purchase new assets.

There are qualifying conditions to be met to ensure entitlement to any relief. This includes ensuring that new assets are purchased within three years of selling or disposing of the old asset (or up to one year prior to the sale). Under certain circumstances, HMRC has the discretion to extend these time limits. In addition, both the old and new assets must be used by your business and the business must be trading when you sell the old assets and buy the new assets. Taxpayers must claim relief within four years of the end of the tax year when they bought the new asset (or sold the old one, if that happened at a later date).

When a couple is separating or is divorced it is unlikely that they are thinking about the tax implications of their actions. However, apart from the emotional stress, there are also tax issues that can have significant implications.

The Capital Gains Tax (CGT) rules that apply during separation and divorce changed for disposals that occur on or after 6 April 2023. These changes extended the period for separating spouses and civil partners to make "no gain/no loss transfers" up to three years after they cease living together. The changes also provide for an unlimited time if the assets are the subject of a formal divorce agreement. Prior to this change, the no gain/no loss treatment was only available in relation to disposals in the remainder of the tax year during which the separation occurs.

There are also special rules that apply to individuals who have maintained a financial interest in their former family home following separation and that apply when that home is eventually sold. This allows for private residence relief (PRR) to be claimed when a qualifying property is sold.

It is also important, during divorce proceedings, to make a financial agreement that is acceptable to both parties. If no agreement can be reached, then proceeding to court action to make a 'financial order' will usually be required.

Accordingly, the couple and their advisers should give proper thought to what will happen to the family home, any family businesses as well as the inheritance tax implications of separation and / or divorce.

In general, there is no Capital Gains Tax (CGT) liability created when a property used as the main family residence is sold. An investment property which has never been used as a home will not qualify. This relief from CGT is commonly known as private residence relief.

Taxpayers are entitled to full relief from CGT when all of the following conditions are met:

1. The family home has been the taxpayers only or main residence throughout the period of ownership.
2. The taxpayer has not sublet part of the house – this does not include having a lodger share your house.
3. No part of the family home has been used exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use).
4. The garden or grounds including the buildings on them are not greater than 5,000 square metres (just over an acre) in total.
5. The property was not purchased just to make a gain.

If a property has been occupied at any time as an individual’s private residence, the last nine months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold. The time period can be extended to thirty-six months under certain limited circumstances. There are also special rules for homeowners that work or live away from home.

Married couples and civil partners can only count one property as their main home at any one time.

A Post Transaction Valuation Check (PTVC) can be requested from HMRC for an individual to work out a capital gains tax liability or for companies to calculate corporation tax liability on chargeable gains. The request for a PTVC should be made using the CG34 form. HMRC’s guidance says the form must be completed and sent to the address on the form at least three months before the relevant tax return filing date.

The PTVC is a service offered by HMRC to check valuations after a disposal has been made, including a deemed disposal following a claim that an asset has become of negligible value but before the completion of a self-assessment return. This service is available to all taxpayers, individuals, trustees and companies.

If HMRC agrees with the valuations set out they will not question the use of those valuations in the return, unless there are any important facts affecting the valuations that have not been disclosed. Agreement to the valuations does not always mean that HMRC agree the gain or loss. When the return is filed, HMRC will consider the other figures used. If an agreement cannot be reached, HMRC will suggest alternatives such as using specialist valuers.