Concessionary Purchases: Buying Property Under Market Value
A concessionary purchase occurs when a family member, such as a son or daughter, buys their parents' property for significantly less than its current market value. This is also legally referred to as a transaction at an undervalue. While anyone can technically buy a property below market value, intergenerational family transfers are by far the most common scenario.
While it is theoretically possible to buy from an unconnected seller at a discount, this is incredibly rare. Lenders and solicitors will closely scrutinise such transactions, as receiving "free equity" from a stranger raises immediate anti-money laundering red flags. In such exceptional cases, you require a specific legal deed to confirm the gifted equity.
The most common question we receive is, "Is it legal to transfer a property under market value?" The answer is yes, but with a major caveat. While the transaction itself is entirely legal and accepted by HM Land Registry, the sellers' financial position and their motivation for discounting the property can trigger strict legal and tax scrutiny during the conveyancing process. This complete guide explains exactly how a concessionary purchase works, the common hurdles that arise, and the hidden risks surrounding insolvency, Capital Gains Tax, Inheritance Tax, and the deliberate deprivation of assets for care home fees.
- A concessionary purchase allows you to buy a property from family for less than its true open market value.
- You only pay Stamp Duty Land Tax (SDLT) on the discounted purchase price, not the property's full market value.
- The seller may still be liable for Capital Gains Tax (CGT) calculated on the property's full market value.
- You must secure a specialist concessionary mortgage product, which operates entirely differently from a standard gifted deposit mortgage.
- Even if no money changes hands (zero consideration), you still need two separate solicitors to legally transfer the equity and protect the transaction from being reversed.
What is a concessionary purchase?
A concessionary purchase is a transfer of a property under the true market value that it would achieve if sold on the open market in a standard, arm's-length transaction. This route is typically used to keep a property within the family while allowing the younger generation to get onto the housing ladder without needing a massive cash deposit.
Example of a concessionary purchase
Your parents own a property valued at £200,000 that you would like to buy. You do not have a cash deposit, and your salary means you can only secure a £150,000 mortgage. Your parents can help you by offering to sell you the property for £150,000, provided you can secure a specialist concessionary mortgage for this amount.
The saving is often thought of as a gifted deposit; however, unlike a normal gifted deposit, no money changes hands, and the price paid is the concessionary price below market value, not the actual market price. If it is your mum and dad's property, then you should read this article next: Can I buy my parents' house under market value?
Expert Tip: How to transfer property to children under 18
Under UK law, a minor (anyone under 18) cannot legally hold property or be registered on the title deeds at HM Land Registry. Furthermore, a property can have at most four registered legal owners.
If your intention is to transfer a property to children who are underage, you cannot gift it to them directly. Instead, you must place the property into a trust. Here is a brief guide on what you need to do to set this up:
- Choose the trust type: The most common option is a Bare Trust (where the child automatically becomes the absolute legal owner at 18) or a Discretionary Trust (where trustees retain control over when and how the child inherits).
- Appoint your trustees: You must appoint adult trustees (often the parents or trusted relatives). These individuals will be registered on the Land Registry title deeds as the legal owners who manage the property on the child's behalf.
- Draft a Trust Deed: A solicitor must draft a legally binding Trust Deed. This document designates the minor as the beneficial owner, meaning they own the property's financial value even though the trustees hold the legal title.
- Update HM Land Registry: Your conveyancing solicitor will complete the property transfer to the trustees and register a restriction on the title to legally protect the child's beneficial interest.
- Register with HMRC: To comply with modern anti-money laundering regulations, most property trusts must now be formally registered with HMRC's Trust Registration Service (TRS).
Partner & Conveyancing Solicitor
Concessionary purchase pros and cons
Pros | Cons |
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Expert Tip: A concessionary purchase is different to a gifted deposit
A concessionary purchase is frequently confused with a gifted deposit, but the legal and financial mechanics are entirely different.
- Gifted Purchase: A gifted deposit is where your parents give you money as a cash gift to help you buy a property at its full market value. For example, if you receive a £50,000 cash gift from your parents to buy a £500,000 property, you will need a standard £450,000 mortgage. The gift is declarable to your mortgage lender, but this is a very standard way for a first-time buyer to get onto the housing ladder.
- Undervalued Purchase: A concessionary sale operates differently because no physical cash is transferred. The "gift" is simply the equity left in the house. If the property is worth £500,000 but your parents agree to sell it to you for £450,000, you obtain a £450,000 mortgage, and the price written into the legal contract is simply £450,000.
The golden rule: If you are buying a property at full market value and receiving a gift of money from your parents, the process is simple. If you are paying under the market value, you must follow the specialist concessionary purchase process.
CEO of SAM Conveyancing
What is the concessionary purchase process?
You can go two routes, depending on whether you are paying consideration (money changing hands or paying off a mortgage). Here is the conveyancing process for both types:
Route ONE: Purchase under value where some money is changing hands
This is where parents are being paid some money for the property, but not the full current market value. The conveyancing process follows the standard procedure, in which one solicitor acts for the parents, and a separate solicitor acts for the children. The sellers will need to complete all the standard protocol forms. If the property is leasehold, they must also provide a leasehold information pack including Asbestos Reports, Fire Risk Assessments, an EWS1 Form, and any other freehold management documents. The buyer must raise formal legal enquiries, and their solicitor must be satisfied with the responses and ensure they meet the lender's strict requirements, exactly as if it were an arm's-length transaction (i.e., as if you were not related).
Regardless of your relationship, the process is strictly dictated by the mortgage lender. They require adherence to the standard legal protocol, including the formal exchange of contracts and completion.
What are the extra steps to the standard conveyancing process?
- Concessionary mortgage: You will need a mortgage lender to grant you a specific mortgage offer that allows the property's value to be stated at the lower, discounted amount in the legal contract.
- Statutory Declaration of Solvency: The sellers will be required to swear a statutory declaration confirming that they are solvent, have no pending bankruptcy proceedings, and are not gifting the equity to deliberately avoid paying their creditors.
- Insolvency Indemnity Insurance: Because the Insolvency Act allows creditors to reverse an undervalued transfer for up to five years if the seller goes bankrupt, the buyer will be required to purchase an indemnity policy to protect the mortgage lender from this risk.
- Legal Advice on the Gift: To prevent future claims of coercion or undue influence, the sellers must be fully advised on the financial implications of giving away their equity. Because the sellers have their own solicitor acting on the sale, this advice is usually provided as part of their standard representation, though a few stricter lenders may still insist on a formal Independent Legal Advice (ILA) certificate.
How long does the process take?
The timeline is similar to a standard conveyancing process: typically 8 to 12 weeks for a freehold property, and slightly longer for a leasehold. While you can speed up the transaction by returning paperwork quickly, delays are still common. Parents can sometimes be slower in providing the necessary protocol documents, or the buyers (children) may struggle to obtain the correct concessionary mortgage offer from their lender.
Expert Tip: How do you know the current market value of your property?
While a local estate agent can give you a rough marketing appraisal, HMRC requires a robust, evidence-based figure. The safest and most accurate way to establish the true open market value for a concessionary purchase is to instruct a RICS Registered Valuer to carry out a formal Red Book Valuation.
It can be tempting to artificially deflate the market value to reduce your Stamp Duty Land Tax (SDLT) or Capital Gains Tax liabilities, but this is a highly dangerous strategy. HMRC actively monitors family property transactions and frequently uses its own District Valuer Services (DVS) to challenge suspicious valuations.
The Penalty Risk: If HMRC investigates and proves the property is worth more than you declared, you will be legally required to pay the tax shortfall immediately, plus daily interest. Furthermore, if HMRC deems the undervaluation to be careless or deliberate, they can issue severe financial penalties of up to 100% of the unpaid tax.
Case in Point (Palliser v HMRC, 2018): HMRC will aggressively challenge valuations they believe are too low. In this landmark tribunal, a £1.4 million property valuation was successfully contested because the surveyor failed to include the property's development potential (known as "hope value"). The court ruled the true value was £1.6 million. If your property has obvious room for extension or improvement, HMRC expects that potential to be reflected in your valuation.
Chartered Surveyor, RICS Registered Valuer
Route TWO: Zero consideration with no mortgage and no money
This is where parents are giving away a property for free. They have no mortgage on the property, and their children are not paying them any money. This is legally known as a 'zero consideration' transfer. For these types of transfers, HM Land Registry allows a simpler process with no protocol forms or exchange of contracts, but instructing separate solicitors is still essential to ensure the transaction cannot be reversed later.
- Independent Legal Advice (ILA): The parents must obtain ILA to prevent future claims of coercion or undue influence. They must receive formal Independent Legal Advice from a separate solicitor to confirm they fully understand the financial and legal implications of giving away their equity.
- TR1 Signing: Both the parents (the transferors) and the children (the transferees) must sign the TR1 Form as a legal deed.
- ID1 Verification: If the parents choose not to instruct a conveyancer to act for them on the transfer, HM Land Registry mandates a strict identity verification process using an ID1 Form. This can also be completed remotely via the ID5 process (a secure video call) alongside the ID1 verification.
- Leasehold Completion Requirements: If the property is leasehold, the solicitor acting for the children must satisfy the freeholder's completion requirements. This may include a Deed of Covenant, compliance with the Building Safety Act, payment of service charges and ground rent in full, and payment of notice fees. This cannot be avoided; HM Land Registry will reject the name change if these requirements are not met.
- Completion: Unlike the first route, completion simply occurs on the day the TR1 deed is dated by the solicitor, and the documents are submitted to HM Land Registry. However, you should be aware that the final registration of the new names can take several months due to ongoing Land Registry backlogs.
How long does the process take?
A freehold property transfer can often be completed in just a couple of weeks. However, transferring a leasehold will take significantly longer, as your solicitor must wait for the freeholder to process and agree to their specific completion requirements.
Whichever route you take, we can help, as we have two solicitors who specialise in these undervalued property transfers. Give us a call today and see how we can help. Call 0333 344 3234 (local call charges) or email help@samconveyancing.co.uk.
Get a Fixed Fee quote today for a gifted property transfer between family. We can help whether it is a zero-consideration transfer or a discounted concessionary purchase.
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What are the tax implications of a concessionary purchase?
Do you pay Stamp Duty Land Tax (SDLT)?
Stamp Duty is payable strictly on the consideration (the actual price paid) stated within the contract of sale, not the property's true market value. This allows families to save significantly on tax when transferring property.
For example, if the property's current market value is £500,000, but you are buying it from your parents for £250,000, you only calculate and pay Stamp Duty on the £250,000.
Expert Tip: The common mistake of the wrong mortgage offer
One of the biggest issues we encounter when handling a concessionary sale and purchase is when the buyers obtain a mortgage for a gifted deposit, not for an undervalued transfer. If your mortgage offer states the property is being purchased at the current market value, not the concessionary lower amount, then the contract of sale must state the full market value, and Stamp Duty is paid on that higher amount.
To avoid this, you should speak to a specialist concessionary purchase mortgage advisor to ensure the mortgage is offered based on the property transferring at the lower amount, allowing you to pay Stamp Duty at that price rather than the full market value.
CEO of SAM Conveyancing
Do you pay Capital Gains Tax (CGT)?
If the property is not the seller's primary residence (HMRC has a strict Principal Private Residence test for this) and the disposal is to a connected person like a child, Capital Gains Tax is payable. Crucially, HMRC will calculate the CGT based on the property's full market value, not the discounted consideration stated in the contract. To understand the exact calculations, read our guide on Capital Gains Tax on Gifted Property.
If there is a Capital Gains Tax liability, you must file a UK property return and pay any tax due to HMRC within 60 days of the completion date.
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Tax Band
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Income Tax Band
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Capital Gains Tax Rate (chargeable on profits)
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Basic rate income taxpayer
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£0 to £50,270
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18%
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Higher rate income taxpayer
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Over £50,270
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24%
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Expert Tip: You can pay less CGT if you have lived in the property
HMRC allows you to only pay Capital Gains Tax on the period the property was not your main home. This is called Private Residence Relief (PRR). You calculate your relief by working out how many months you owned the property, and what proportion of that time it was your main residence, plus an automatic 9-month grace period for the final months of ownership.
You then apply this qualifying percentage to the total capital gain to see exactly how much of your profit is entirely exempt from tax. Because the rules and calculations are strict, you should always speak to a tax accountant to help you calculate the liability and file the 60-day tax return.
CEO of SAM Conveyancing
Do you pay Inheritance Tax (IHT)?
Yes, the discount (the difference between the market value and what you paid) is classed as a "Potentially Exempt Transfer" by HMRC. This means it is considered a gift for Inheritance Tax purposes.
| Number of years before death | Rate of IHT on the gift |
| 0 to 3 Years | 40% |
| 3 to 4 years | 32% |
| 4 to 5 years | 24% |
| 5 to 6 years | 16% |
| 6 to 7 years | 8% |
| 7 or more years | 0% |
Summary: Navigating a concessionary purchase
Buying a property from family under market value is an excellent way to keep assets within the family and help the next generation get onto the property ladder without needing a massive cash deposit. However, as this guide highlights, it is not as simple as just agreeing on a lower price. Here is our checklist:
- Is there any money changing hands? Is this a complete gifted transfer, or are the sellers being paid money? The choice here dictates the legal process you need to follow.
- Choose the correct mortgage: Make sure you get a specific concessionary mortgage, and not a standard mortgage based on the full market value, to avoid paying excess Stamp Duty.
- Determine the true market value: Instruct a RICS surveyor to carry out a formal Red Book Valuation to prevent HMRC from successfully challenging your figures later.
- Understand the tax implications: Remember that while the buyer saves on Stamp Duty, the seller may still face a Capital Gains Tax bill based on the property's full market value.
- Instruct independent solicitors: Both the parents and the children must have their own separate legal representation to prevent conflicts of interest and future claims of undue influence.
Need help with your concessionary purchase?
Because these transactions sit at the complex intersection of property law, tax, and specialist lending, you need experts who understand the entire picture. At SAM Conveyancing, our panel of specialist conveyancing solicitors and independent mortgage brokers manage the whole process under one roof.
- Specialist Mortgage Advice: We will find a lender who accepts concessionary purchases and ensure your offer is drafted correctly to minimise your Stamp Duty liability.
- Expert Conveyancing: We provide the separate legal representation required for both buyers and sellers, including arranging Insolvency Indemnity Insurance and Statutory Declarations.
- RICS Valuations: If you need a formal Red Book Valuation to satisfy HMRC or your lender, our in-house RICS Registered Valuers can provide it.
Or call our specialist team on 0333 344 3234 (local call charges apply).
Frequently Asked Questions
Andrew Boast FMAAT is a qualified accountant, conveyancing specialist and author with over 25 years of experience in the UK property sector. Since beginning his career in 2000 within established SRA and CLC-regulated conveyancing solicitor firms, Andrew has overseen the legal journeys of more than 75,000 clients.
He is the self-published author of the first-time buyer guide: How to Buy a House Without Killing Anyone, and a frequent contributor to mainstream UK media on legislative updates, property law, first-time buyer guides, conveyancing best practices, and stamp duty changes. Andrew specialises in resolving complex title issues, property conflict disputes, and property tax options, streamlining the enquiry process to reduce transaction times and maintaining a client-friendly focus.
Amanda Ambler is a highly accomplished conveyancing specialist with over 15 years of dedicated experience across residential property law, legal compliance, and practice management. Having held senior roles, including Head of Legal Practice and Head of Conveyancing at established UK law firms, Amanda possesses a profound, hands-on understanding of the technical intricacies of the property market.
As the designated Legal Content Reviewer for SAM Conveyancing, Amanda ensures that every guide, legal update, and resource published meets the absolute highest standards of accuracy, regulatory compliance, and factual integrity. Her rigorous review process guarantees that complex property legislation and industry processes are communicated clearly, transparently, and safely for home buyers and sellers alike.
