Why donate shares rather than cash?
Donating shares directly can sometimes be a more tax-effective way of giving than selling shares first and donating the cash proceeds. The advantages will depend on the type of shares involved, tax treatment and individual circumstances, but for some donors the difference can be significant.
UK tax treatment for gifting shares
Where qualifying* shares are donated to a UK charity:
- The donor may be entitled to income tax relief on the full market value of the shares.
- The donor is treated as making no gain or loss for Capital Gains Tax purposes, so will not
have to pay any Capital Gains Tax.
This means that the donor can achieve relief at their highest marginal rate while ensuring that the charity receives the full value of the shares.
When a UK donor sells their shares and gifts cash to a UK charity, they will realise a capital gains tax charge, however they will then be eligible for permitted income tax relief on their cash gift, as well as the receiving charity being able to claim Gift Aid, which adds 25% to the sum available for the charity.
*Qualifying shares refer to shares that HMRC permits as a qualifying charitable gift as per section 5.3 of their guidance.
US tax treatment for gifting shares
For US taxpayers, donating appreciated long-term stock held for more than one year will generally avoid Capital Gains Tax on the donated shares, and provide a charitable deduction based on fair market value, subject to applicable adjusted gross income (AGI) limits. For the donor to be eligible for a deduction, a gift receipt must be issued by the charity, and if the stock is not a publicly traded security then a qualified appraisal of the value will need to be undertaken.
Should you donate shares before or after the IPO?
The timing of a share donation is often the most important decision a donor and adviser will make.
Donating shares prior to an IPO can offer significant advantages, particularly where the shares have already appreciated.
Potential benefits include:
- No Capital Gains Tax on the donated shares
- Allowing the future appreciation (including IPO uplift) to accrue entirely to the charity to enable greater impact
- Aligning philanthropy with a broader liquidity and estate planning strategy.
Where pre-IPO shares are contributed to a charitable vehicle such as a donor advised fund (DAF), the donor may be eligible for tax relief at the point of contribution, and the DAF can then participate in the liquidity event, potentially increasing the ultimate charitable value.
Key risks and complexities of donating shares before an IPO
Pre-IPO giving is, however, usually more complex due to the assets being private and several restrictions involved:
- In most cases, unlisted or privately held shares do not qualify for UK income tax relief (you should seek specialist tax advice.
- Qualified appraisals and valuations must be obtained for private shares.
- Moreover, in the US, a qualified appraisal and form 8283 must be filed by the donor for private stock gifts exceeding $5,000 in order to qualify for a deduction.
- Restrictions in company bylaws can sometimes prevent non-profit shareholding.
- Charity acceptance criteria will be a factor (many charities do not have the ability or inclination to accept illiquid or restricted assets).
- Restrictions for the individual shareholder regarding their personal vesting and share types (more on this later).
These factors are one reason many donors involve legal, tax and philanthropic advisers as early as possible. Early planning can help identify restrictions and avoid delays when an IPO approaches.
From an operational perspective, organisations such as CAF will typically undertake detailed due diligence on the company, assess the legal and tax implications of holding the asset, seek assurance as to the liquidity timeline (many charities do not feel comfortable accepting illiquid stocks) and require internal approvals before accepting private or pre-IPO shares.
Post-IPO share donations (after listing)
Donating shares once they are publicly listed is usually simpler for the donor and the receiving charity, but there are still important considerations. Firstly, it is important to be aware of IPO lock-up periods, which commonly restrict stock transfers including sales, gifts and disposals for 90–180 days following listing. It is also important to be aware of insider dealing rules and affiliate restrictions.
Individual factors to consider when donating shares
The options will depend on the shares held and any restrictions attached to them.
The donor will need to check if the shares are fully vested or subject to restrictions (e.g. Restricted Stock Units or options). They will also need to ensure that the holding period has been met for assets to be considered appreciated.
Directors, executives and major shareholders may face additional restrictions on transfers, and company approval may be needed before donating or transferring shares.
Structuring charitable giving: the role of donor advised funds
Donor advised funds (DAFs) are often used in IPO-related giving because they are well suited to receiving complex assets such as shares, property and artwork. At CAF, we regularly support donors who want to incorporate these types of gifts into their charitable giving.
A DAF enables a donor to make an irrevocable charitable contribution, receive immediate tax relief on eligible gifts, and then recommend grants to charities over time. This can be particularly valuable around an IPO, when decisions about liquidity, tax and philanthropy may all be happening at once.
By separating the timing of the gift from decisions about which charities to support, a DAF gives donors more time to develop a considered giving strategy. With CAF's support, donors can shape an approach that reflects their values, responds to emerging opportunities and maximises the impact of their giving.
Cross-border considerations: US-UK donors
For individuals with tax obligations in both the UK and the US, charitable giving often requires additional planning. The structure of a gift can affect whether it is recognised for tax purposes in one or both jurisdictions.
In some circumstances, a dual-qualified charitable structure, such as the CAF American Donor Fund, can help a donation qualify under both UK and US tax rules. These arrangements are particularly relevant for US citizens living in the UK and others with transatlantic income, assets or tax considerations.
When gifting non-cash assets such as shares, it is important to understand how the asset will be treated in each jurisdiction. Tax reliefs, deductions and eligibility requirements do not always align, particularly for private or unlisted shares. As discussed earlier, private shares are unlikely to qualify for UK income tax relief, even where they may receive different treatment in the US.
Practical considerations and execution of gifting shares
To plan and implement a gift like this, donors and their advisers should work together to ensure planning begins as early as possible ahead of the event. Initially, it’s important to talk to the charity or Donor Advised Fund you wish to donate the assets early, to check they can accept the gift in principle, remembering that many charitable organisations might not be equipped to accept illiquid assets.
During complex gifts like this, trust and communication between all parties is essential, as is record keeping – ensure all transfer documentation, agreements, deeds and valuation appraisals and forms are correctly recorded and stored securely.
To sum this up, you will usually need to confirm:
- Whether the charity or DAF can accept the shares.
- Whether there are transfer restrictions or lock-up periods.
- What valuations, documents or approvals are needed.
- How the gift will be recorded for tax and compliance purposes.
An IPO can be a turning point not only financially, but philanthropically.
For donors, it presents an opportunity to convert wealth creation into lasting impact. For advisers, it offers an opportunity to help clients align their financial, family and charitable objectives.
With thoughtful planning and the right support, a share gift can help more value reach charitable causes and create the foundation for meaningful giving over the long term.
We are unable to offer advice on personal tax or financial issues; we would always recommend that you speak to a professional tax or financial adviser. We cannot accept any loss arising from action taken on the basis of this article. This blog was correct as of June 2026.
