If you are considering transferring shares, perhaps to a family member or a business, it’s essential to consider the tax implications.
Share transfers can seem deceptively simple; just a matter of moving ownership from one person to another. But HMRC sees things rather differently, and some share transfers can trigger Capital Gains Tax, Stamp Duty, Inheritance Tax or even Income Tax. It depends on who’s involved, the nature of the shares, and the reason for the transfer.
In this guide, we’ll explain what happens when shares are transferred, the potential tax consequences, and the circumstances where no tax applies. If you are unsure of your tax liabilities, please seek professional tax advice from our team of experienced chartered accountants at Butt Miller. Please contact us and we’ll be happy to help.
What happens when you transfer shares?
When you transfer shares, ownership moves from one person or company (the transferor) to another (the transferee). The tax implications depend on the relationship between the two parties, their status and the types of shares.
Between spouses or civil partners
Married couples and civil partners can transfer shares between them at “no gain/no loss”, meaning there is no immediate charge to tax. The recipient simply takes over the original cost and pays tax on the gain should they come to sell the shares later on.
Example
You by shares for £10,000, and their value increases to £50,000. You can transfer them to your spouse without triggering an immediate Capital Gains Tax bill. If they later sell the shares, Capital Gains Tax will be due on the gain they make, calculated as the sale price minus the original £10,000 cost.
Between connected persons
‘Connected persons’ for capital gains tax purposes could be a relative, trustee, partner or a company.
Example
You bought shares for £10,000, which are now worth £50,000. If you decide to gift those shares to your sister, HMRC treats the transaction as if you had sold them at their full market value. This means you are considered to have a deemed gain of £40,000, even though no cash transaction took place, and without cash proceeds to pay it. This is often referred to as a “dry tax charge.”
However, if the shares are in a trading company, you and your sister can jointly claim gift hold-over relief. This allows you to postpone the tax burden: the gain is effectively passed on to your sister, who inherits your original purchase price as her base cost. She won’t pay Capital Gains Tax immediately but will do so when she eventually sells the shares.
What types of tax are due on the transfer of shares?
Capital Gains Tax
When transferring shares, including to other family members, you could be treated as having disposed of those shares at their market value, even if you gift them. This can trigger a Capital Gains Tax charge if the value of the shares is more than what you paid for them.
Capital Gains tax payable on shares needs to be reported on a self-assessment tax return for the tax year of disposal. You will need to pay tax on the first January following the end of the tax year.
Stamp Duty
Stamp Duty applies to the transfer of paper-based existing shares, where a physical share certificate exists. The buyer is liable where the consideration exceeds £1,000. The amount payable is 0.5% rounded to the nearest £5.
Stamp Duty only applies to the transfer of existing shares, so nothing is due when new shares are issued.
Stamp Duty Reserve Tax
This applies to electronic share transactions, typically through CREST or another recognised stock exchange. This is collected automatically by the stockbroker; no stock transfer form is required for physical stamping, nor is any share purchase agreement typically required.
Inheritance tax
Gifting shares is a potentially exempt transfer (PET) for Inheritance Tax purposes. If you survive the gift by seven years, the value of the gift falls outside of your estate. Depending on the type of company, some business shares can qualify for business property relief (BPR), which can reduce, or even eliminate, the tax due.
Income Tax
Generally, no Income Tax is due for just transferring shares. It will only arise when the new owner of those shares later receives dividends or other benefits received by virtue of their beneficial ownership.
If shares are transferred to an employee, HMRC may treat the transfer of shares as employment income if it is linked to their job role, in which case there would be an Income tax and National Insurance liability.
When is tax triggered on the transfer of shares?
Tax on a transfer of shares is generally triggered in the tax year of disposal, provided no spousal or other exemption exists.
The date of disposal is the date that the transfer is legally effective. For a private company, this is usually the date the stock transfer form is executed and delivered to the company, and the company updates its share register.
When is transferring shares tax-exempt?
There are several circumstances in which a transfer of shares does not trigger an immediate Capital Gains Tax (CGT) liability:
- Transfers between spouses or civil partners: Assets can usually be transferred freely between spouses or civil partners without CGT. The recipient simply takes on the original base cost.
- Transfers upon death: When someone dies, there is no CGT on the transfer of their assets. Instead, beneficiaries inherit the assets at their market value on the date of death, benefitting from the step-up in base cost.
- Certain business restructurings: In specific situations, such as selling to an Employee Ownership Trust (EOT) or carrying out a share-for-share exchange, special reliefs may apply to defer the CGT. This means the gain is not lost, but postponed until a later disposal
There is no Stamp Duty or Stamp Duty Reserve Tax due if;
- No consideration is given (or debt assumed): If the shares are transferred as a gift, or inherited, and the recipient does not pay money or take on any debt in return, there is no Stamp Duty or SDRT liability.
- New shares are issued: When a company issues new shares directly to shareholders (for example, through a rights issue or subscription), this does not attract Stamp Duty or SDRT because it is not treated as a transfer of existing shares.
Transfers at death
When someone passes away and leaves shares to their beneficiaries, HMRC treat it as if the new owner (the beneficiary) acquired them at their market value on the date of death. This is known as a “step-up” in base cost for Capital Gains Tax (CGT). What this means in practice is that the beneficiary effectively starts fresh, with the market value at the date of death becoming their new “purchase price” for future calculations.
Certain business restructuring
Tax relief may be available to individuals who are selling their business by way of Business Asset Disposal Relief (BADR), formerly known as Entrepreneur’s relief, which caps the Capital Gains tax arising at 14% up to £1 million (increasing to 18% from April 2026).
When looking for an exit strategy, a tax-efficient strategic move for existing shareholders in a family business is to sell shares to an Employee Ownership Trust (EOT). An EOT is a trust that will hold shares in the company on behalf of its employees. Provided the conditions are met, this can circumvent the Capital Gains tax liability arising on sale. This can be an effective way for family members to retain legacy in a company.
Gifting shares to children
When you gift shares to your child, if they are under 18 or an adult, HMRC treats this as if you have sold the shares at their current market value, even though no money changes hands, meaning Capital Gains Tax could be due.
Holdover Relief can sometimes be claimed to defer the CGT, but it’s not automatic and depends on both the type of shares and whether specific qualifying conditions are met. For example, shares in a trading company, or if the transfer is linked to succession or inheritance planning.
Gifting shares to children does not trigger an Income Tax charge at the point of transfer. However, there are special settlement rules for minors. If the child receives more than £100 in income (such as dividends) from the gifted shares, that income is taxed on the parent who made the gift – not the child. The £100 limit applies separately to each parent.
Thinking about transferring shares? Talk to us
Whether you are the person giving or person receiving shares, or you have made a profit on an investment, the tax implications must be carefully considered.
At Butt Miller, we provide professional advice to ensure you remain compliant while taking advantage of any available tax reliefs. If you are considering a transfer of shares, please contact us today for professional advice.
Frequently asked questions – can I transfer shares without tax implications?
Why would I need to pay Stamp Duty on shares?
Shares represent ownership in a company, so transferring them is effectively transferring wealth and value attributable to the voting rights, as well as the opportunity for dividends. Therefore, HMRC treat it as a transaction in exchange for consideration and charges Stamp Duty.
What if I transfer shares for less than market value?
Generally, HMRC will treat it as a deemed sale at market value unless the sale has taken place at ‘arm’s length’, i.e., a genuine commercial sale.
