Capital Gains Tax on Gifted Property from SAM Conveyancing
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What is the Capital Gains Tax on Gifted Property?

05/03/2023
(Last Updated: 08/12/2023)
3,360
6 min read
Capital gains tax on gifted property varies depending on the relationship between the owner of the property and the party/ies being gifted the property. HMRC will look to the relationship between the seller and the buyer to see how to treat the capital gains tax on gifts.

Where the transaction is transferring a property for under the market value then the disposal needs to consider if the any of the sellers are connected, defined below, to the buyer and if so then the disposal value will be the full market value regardless of what money changed hands (if any).

A remortgage doesn't in itself give rise to a CGT liability, but if linked to a transfer of the beneficial interest, even if gifted, then it may do. Read more - Do you pay capital gains tax on remortgage?

How can you gift a property to your child?

The most common way to transfer property under market value is often called a Concessionary Purchase.

We specialise in gifting property to children and completing the transaction quickly. Call us to ask any questions or click the button below to get a Fixed Legal Fee Quote.

Experienced in Gifting Property - Fixed Legal Fees – Fast Completions


We examine in more detail how parents are affected by capital gains tax on gifts of property to children and include how to calculate the CGT due, however if you are looking for what CGT is paid if you are married, then read this article - Capital Gains Tax on Property for Married Couples

The good news is that there is no capital gains tax on your Principle Place of Residence (where you live), there is only CGT on second properties (such as a buy to let or a holiday home).

The rules around the gift of property to children are set out here - CG14530 - Consideration for disposal: market value rule. It states that:

Normally the consideration for the disposal of an asset is what the person who makes the disposal gets for it. 

And the acquisition cost of the person who acquires the asset is the consideration which that person gave. But in certain circumstances the consideration which actually passes between the parties to the transaction is ignored

Instead, the consideration is deemed to be equal to the market value at the date of disposal of the asset disposed of. The same figure is used as the acquisition cost of the person who acquires the asset.

Under TCGA92/S17 & TCGA92/S18 it goes on to state:

You use the market value of the asset instead of the actual consideration that passed between the parties where...the disposal and acquisition of the asset is between 'Connected Persons'. The law for this is set out here - Taxation of Chargeable Gains Act 1992 - Section 18 - Transactions between connected persons

Capital Gains Tax on Gifts

A connected person is defined under HMRC CG14580+ which states: A person is connected with an individual if that person is a relative of the individual and a relative is further defined: Relative means a brother, sister, ancestor or lineal descendant. 

The term ‘relative’ does not cover all family relationships. In particular, it does not include nephews, nieces, uncles and aunts". As your children are lineal descendants then if you gift your property to your children then regardless of the actual consideration, the CGT paid by the parents is at market value.

Below is an example of a family tree, showing people who are connected to the owner for CGT purposes.

Family tree representing connected persons in relation to Capital Gains Tax on Gifted Property, from SAM Conveyancing

How do you calculate Capital Gains Tax on property?

 
£
Proceeds from sale of property at Market Value
 
X
 
Less
 
 
Incidental costs of disposal
eg. estate agent's fee, solicitor's fee
 
X
 
Equals net proceeds
 
X
 
Less
 
 
Original purchase price of property
 
X
 
Incidental costs of purchase
eg. stamp duty, Land Registry cost, solicitor's fee
 
X
 
Gain (or loss)
 
X
 
Less capital gains tax allowance
 
X
 
Amount subject to Capital Gains Tax
 
X
 
 
You should speak to a tax advisor for capital gains tax advice.
 

What is the rate for capital gains tax on gifted property?

The Capital Gains Tax on residential sale profit is as follows:
 
Tax Band
Income Tax Band 
Capital Gains Tax Rate (chargeable on profits)
Basic rate income tax payer
£0 to £50,270
18%
Higher rate income tax payer
Over £50,271
24% (post 6th March 2024 budget)
 
Non-UK Residents pay a flat rate of 28% for any gain.
 
You have a tax free allowance of £3,000 for 2023-24.
 


Need tax advice on your property transaction?

  • Get up-to-date property tax advice on SDLT, CGT, IHT, Personal versus partnership versus company structure.
  • Free 15-minute initial consultation with a qualified accountant from our panel of tax advisors.
  • Ask your tax questions and get guidance on what you can do next.
  • If there is some further accountancy work required, then you'll be quoted for this as a separate piece of work with no obligation to purchase.


Frequently Asked Questions
AVOID
TAXABLE
CONNECTED
MARKETVALUE
HOW
EXAMPLE
Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing Manager
Reviewed by:

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.


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