Can I Gift Shares to My Children to Save Inheritance Tax? — UK 2026/27

Gifting shares to your children can reduce the value of your estate for Inheritance Tax — but unlike gifting cash, shares trigger a Capital Gains Tax bill at the point of transfer. Understanding both taxes together is essential before making the gift. Here is the full picture for 2026/27.

The Two Tax Costs of Gifting Shares

When you give shares to your children, two separate taxes are potentially relevant:

These taxes operate independently. The CGT is due even if you survive 7 years and the gift is fully exempt from IHT.

Capital Gains Tax on Gifted Shares

When you give shares to your children (or anyone other than a spouse/civil partner), HMRC treats it as a disposal at market value on the date of the gift.

CGT calculation:

• Proceeds = market value at date of gift
• Less: original acquisition cost (plus any allowable costs)
• Less: CGT annual exempt amount (£3,000 in 2026/27)
• Result: taxable gain

CGT rates for shares in 2026/27

Worked example: Margaret gifts her BP shares

Margaret bought BP shares in 2010 for £8,000. They are now worth £35,000. She gifts them to her daughter Emma.

• Disposal proceeds (market value): £35,000
• Less acquisition cost: £8,000
• Gross gain: £27,000
• Less annual exempt amount: £3,000
• Taxable gain: £24,000
• Margaret is a higher rate taxpayer: CGT at 24% = £5,760

Margaret must pay £5,760 to HMRC by 31 January 2028 (via Self Assessment for 2026/27). She receives nothing from the gift — she must fund this from other money.

Inheritance Tax — The 7-Year Clock

Gifts of shares to your children (as individuals, not trusts) are Potentially Exempt Transfers (PETs). The IHT treatment:

Note: taper relief reduces the IHT charge — but the gift must first exceed any remaining nil-rate band (£325,000) before IHT applies. If your total estate including the gift is under £325,000, no IHT is due regardless.

Business Property Relief — Eliminating IHT Without the 7-Year Wait

For some types of shares, Business Property Relief (BPR) can eliminate the IHT charge entirely — meaning the shares never become subject to IHT, regardless of when you die.

BPR applies to:

• Unquoted shares in qualifying trading companies (100% relief, up to £1M from April 2026)
• AIM shares that qualify as unquoted for BPR purposes (same limits from April 2026)
• Shares in your own trading business — sole trader or partnership interest (100% up to £1M)

From April 2026, BPR has been reformed:

• First £1 million of qualifying assets: 100% relief (nil IHT)
• Excess above £1 million: 50% relief (effectively 20% IHT on the excess)

AIM shares lose their previously unlimited 100% relief under the new rules.

Quoted shares (main FTSE market) do not qualify for BPR.

The Spouse Step-Up Trick

One way to sidestep CGT on gifting shares is to gift them to your spouse or civil partner first (no CGT between spouses), and let the recipient spouse then gift them to your children from their own estate.

The second gift (spouse to children) will still trigger CGT — but if the receiving spouse has a lower CGT base cost (same as you — the base cost transfers with a spouse gift), the outcome may be similar. However:

• The spouse’s own annual exemption (£3,000) and basic rate band can be used
• The 7-year clock starts running from the spouse’s gift
• This is not avoidance — it is legitimate use of the spousal exemption

Running the Numbers: Is It Worth Gifting Shares?

The decision is most clearcut when shares have modest gains (low CGT cost) and form a large part of your estate. For shares with substantial embedded gains, the CGT payable today can reduce the net benefit significantly.

See our gifting property to children IHT guide, taper relief on IHT gifts guide, and inheritance tax guide.

Related Guide

• Inheritance Tax UK 2026/27 — Thresholds, Gifting, Pensions and Legal Reduction