Passing shares to children is a common way for family businesses to plan ahead. It can help children build long-term assets and receive dividend income, while also making use of their tax allowances and lower dividend tax rates.

Like anything though, there are tax implications and other things to consider – which we’ll discuss in this blog.

Can I make my children shareholders of my limited company?

Yes – you can make your child a shareholder within your limited company at any age as there’s no legal minimum age for owning shares within the UK. But there are strict rules when it comes to income tax for minors, as well as potential Capital Gains Tax and other implications.

The tax implications of making your child a company shareholder

There are tax implications you need to be wary of before making your child a shareholder of your limited company. This includes things like settlement rules, Capital Gains Tax and Inheritance Tax.

The settlement rules

The settlment legislation is in place to make sure parents don’t give shares to their children as a way of paying out dividends without paying tax on them. So, while there no age restrictions for your child to become a shareholder, any gross income that exceeds £100 is taxable if they are under the age of 18.

This doesn’t mean your child will be filing tax returns at 10 years old (of course), so the responsibility is therefore passed onto you as their parent – which also means you become liable for their tax bill.

It’s definitely something to consider if your aim is to make both your company and personal finances more tax efficient by appointing a family member as a director.

Capital Gains Tax

It’s one thing to create news shares in the company, but if you transfer shares that you already own then HMRC treats it as a sale to a ‘connected person’ at market value. This means that if the shares have increased in value since you acquired them, you could trigger Capital Gains Tax (CGT) on any gain above your annual allowance.

Even if the transfer is a gift, you must calculate the gain based on the market value at the time of transfer, not the price you originally paid. Careful planning is therefore essential to avoid unexpected tax bills.

You can plan transfers around your CGT allowance or use trusts to manage the tax efficiently – but speaking to your accountant before doing this is strongly recommended.

Inheritance Tax

Gifting shares to your child is seen as a ‘Potentially Exempt Transfer’ (PET) for Inheritance Tax. If you pass away within seven years of gifting the shares, they could become a taxable part of your estate.

In the past, shares often qualified for full (100%) relief. But, from 6 April 2026, this is changing, and above certain thresholds, shares in private trading companies may be subject to an effective 20% inheritance tax rate.
 

Legal and operational considerations

There are a few legal and operational things you need to take into consideration before you go ahead and make your child a shareholder of your limited company. We’ll outline some of them below.

Articles of Association

Some companies forbid minor shareholders – so it’s important you go through your Articles of Association so you know where you legally stand. If this is the case, you may need to wait until your child is over the age of 18.

Managing who can make decisions or control the company

Shares often carry some sort of responsibility or power, such as giving the shareholder the right to vote on decisions for the company, receive dividends, and in some cases even cancel share agreements.

Your child might not be ready for this sort of thing, so you have a few options. You could appoint yourself as a sort of custodian, so even though you’re not the true owner you can make decisions until they’re old enough, whilst the child benefits. This means you can’t just treat those shares as your own – you must act in the best interests of the child.

Another option is to issue a new type of shares which permit the child to receive dividends without having any voting rights.

• You’re not transferring your own shares, you’re issuing new ones from the company
• Their voting rights won’t automatically change when they reach a particular age, which might affect control in the future

Putting things properly in place helps keep decision-making clear and prevents situations like a child blocking company decisions or, if they’re under 18, selling shares to someone outside the family.

Stock transfer and filing

It’s important you understand how to transfer shares over to a child when it comes to the operational side of things. You’ll need to do this by completing a ‘stock transfer form’, updating company registers and notifying Companies House (usually through your next confirmation statement).

Here’s a table checklist for when you begin to transfer shares to your child:

You can create share transfer restrictions, too. For example, you can add rules that stop shares from being transferred to minors and only allow transfers to spouses or children, so ownership stays in the family.

Exit strategy

It’s useful to think about what happens if (for example) your child wants to sell their shares at some point, or if the business needs to raise capital. You might transfer or issue shares with the rule that they can only be returned to the company, but it can get quite complicated so it’s well worth having a chat with your accountant!

Education and responsibility

It’s important you ensure your child understands their role, responsibilities, and the value of their ownership.

Can my child become a director of my limited company?

Children cannot become directors until they are 16 years old – but you can give them significant shares within your business in the meantime.

Are there any alternatives?

Yes – you can look at opening a Family Investment Company, a Trust – or both depending on your needs. A financial advisor or an accountant will help you make sure you’re operating in a tax-efficient, compliant way.

 
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