A shareholder may want to gift shares at some point, most typically to a family member. This means the shareholder transfers shares to another person for nil value.
Transfer process
As with a share transfer for value, a gift of shares will require a stock transfer form. As the gift is by nature a transfer for nil value, the transfer will not create a stamp duty liability. Once the gift is completed, the original shareholder’s share certificate in respect of the gifted shares will be cancelled, and a new share certificate will be issued to the recipient. The company will also need to update its statutory books.
It is important to check the company’s articles of association (and any other documents such as a shareholders’ agreement) before making such a gift, as the transfer must comply with any processes within them and these documents might include restrictions on gifting shares, including to whom you can gift them. The board will need to resolve to approve the transfer and a shareholder resolution may also be required to waive any pre-emption rights.
Under the Vestd platform articles of association, a shareholder can transfer shares to a Permitted Transferee (as defined therein) subject to the consent of a majority of the Directors. Such transfer will not require a shareholder resolution. Any shareholder proposing to gift shares to a person who is not a Permitted Transferee will be required to follow the pre-emption provisions at article 16 of the Vestd platform articles of association. This involves notifying the company of the proposed transfer, and the company offering the shares to existing shareholders pro-rata to their existing shareholdings on the same terms as they are being offered to the proposed recipient of the gift. The shareholders may choose to buy none, some or all of the shares that are proposed to be transferred. The shareholders may waive their pre-emption rights using a shareholder resolution.
Tax implications
Unless shares are being gifted to the shareholder’s spouse/civil partner or a charity, it will be considered a disposal of shares and will give rise to capital gains tax. The amount of tax payable will be calculated based on the difference between the value of the shares at the time the shareholder bought them and the value at the time they gift them. HMRC has set up acalculatorto help shareholders know how much capital gains tax they will pay. Tax liabilities may vary depending on an individual’s circ*mstances and professional tax advice should always be soughtas in certain conditions CGT relief may also be applicable. For more information see theHMRC guide.
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FAQs
The individual gifting stock can gift up to $17,000 per person in 2023 without paying gift tax (up to $18,000 per person in 2024). Receivers of gift stocks may have to pay capital gains tax when they sell the gifted stock.
Can you gift your shares to someone? ›
A shareholder may want to gift shares at some point, most typically to a family member. This means the shareholder transfers shares to another person for nil value. As with a share transfer for value, a gift of shares will require a stock transfer form.
Can I gift shares to avoid capital gains? ›
If you gift business assets or shares in your own trading company, then you may qualify for relief from CGT on the transfer.
Do you have to pay taxes on gifted stocks? ›
This means you don't owe taxes at the time of the gift of the stock. When the recipient sells the stock, however, it is a taxable event. Like everything else related to investing and taxes, a correct cost basis is the key to resolving how much you owe when you sell a stock received as a gift or through inheritance.
Can I transfer my shares to a family member? ›
Shares are classified as "movable property" under the Income Tax Act, 1961. While it's not obligatory to execute a gift deed for transferring shares, doing so can establish a legal record documenting the transfer.
Are there any charges for gifting stocks? ›
The standard off-market transfer fee of ₹25 or 0.03% per stock, + 18% GST whichever is higher, is applicable. There are no additional charges for gifting securities. This is automatically debited from the sender's trading account.
How do I transfer shares to another person as a gift? ›
You have many options if you want to give someone shares of stock. You can transfer a stock certificate if it's held in certificate form, or you can have a broker handle the process if it's a digital stock. Some websites sell shares of stock to be used as gifts.
Do you pay tax when you transfer shares? ›
Shares that have a capital gain can easily be transferred along with the gains to the stock recipient. There's a catch. The recipient of the stock would have to pay taxes on the capital gains, but only once they sell the stocks.
Can I transfer shares to my wife without tax implications? ›
Whilst transferring shares to your spouse or civil partner is unlikely to trigger a Capital Gains Tax liability, your other half may have to pay dividend tax on the dividend income they receive from the company.
What are the tax implications on transfer of shares as gift? ›
Accordingly, the transfer of shares or money to your daughter will be non-taxable in the hands of your daughter. In case you sell the shares and gift the money to your daughter, the capital gains will be taxable in your hands at 10%.
Consider the potential impact of capital gains taxes
If you gift cash, generally there are no income tax consequences for the recipient, though there could be gift and estate tax implications to the donor. But if you give appreciated securities, the capital gains taxes can be significant.
How to avoid capital gains tax on shares? ›
13 ways to pay less CGT
- 1) Use your CGT allowance. ...
- 2) Give money or assets to your spouse or civil partner. ...
- 3) Don't forget your losses. ...
- 4) Deduct your costs. ...
- 5) Increase your pension contributions. ...
- 6) Use your ISA allowance – each year. ...
- 7) Try Bed and ISA. ...
- 8) Donate to charity.
You can start the process online in your own brokerage account by opting to gift shares or securities you own; if you can't find that option, contact your brokerage firm directly. If you want to gift a stock you don't already own, you'll have to purchase it in your account, then transfer it to the recipient.
Is it better to gift stock or cash? ›
By donating stock that has appreciated for more than a year, you are actually giving 20 percent more than if you sold the stock and then made a cash donation. The reason is simple: avoiding capital gains taxes. The maximum federal capital gains tax rate is 20 percent on long-term holdings.
What is the IRS gift limit? ›
What is the 2024 gift tax limit? The gift tax limit (also known as the gift tax exclusion) increased to $18,000 this year, up from $17,000 in 2023. For married couples, the limit is $18,000 each, for a total of $36,000. This amount is the maximum you can give a single person without having to report it to the IRS.
Is there a limit on gifting shares? ›
Under Section 56 of the Income Tax Act, any monetary gift, immovable property, or movable property received by an individual is subject to taxation if the total amount received during the year exceeds Rs 50,000.
