Why buy-to-let does not qualify for s.165 hold-over relief
Key limitation
Standard buy-to-let property does not qualify for s.165 gift hold-over relief. Gifts to family members trigger CGT at market value with no deferral available under s.165.
Section 260 hold-over relief — the trust route
- Section 260 TCGA 1992 applies where a disposal is immediately chargeable to IHT — typically gifts into a discretionary trust (a chargeable lifetime transfer, or CLT)
- The gain is held over into the trust's base cost — no CGT is payable on the gift itself
- IHT at 20% may be payable on the CLT to the extent it exceeds the nil rate band (£325,000 in 2026/27)
- The seven-year IHT clock starts from the date of the gift — surviving seven years removes the CLT from the estate
How to claim hold-over relief
- Both donor and recipient must sign and submit HMRC Form HS295 — the election cannot be made by one party alone
- Deadline: within four years of the end of the tax year of the gift
- The recipient's acquisition cost equals market value at gift date minus the held-over gain (i.e., the donor's original base cost)
- Partial hold-over is possible — crystallise a gain up to the annual CGT exemption (£3,000 in 2026/27) and hold over the balance
Alternatives for landlords gifting property
- Spousal transfer: no-gain/no-loss under s.58 TCGA 1992 — shifts the gain to a potentially lower-rate taxpayer
- Gift to charity: fully exempt from CGT and removed from the estate for IHT
- Incorporation relief (s.162 TCGA 1992): defers CGT on transfer of the whole property business to a company — HMRC challenges apply to pure buy-to-let on trade/investment grounds
- Always take specialist CGT and IHT advice before gifting property