Get a conveyancing quote for gifting property

Our experienced conveyancing solicitors can help with quickly transferring ownership of property from parent to child, spouse or family member for under market value.
 

Gifting Property to Children

21/09/2021
218,306
8 min read
Gifting property to children or to a spouse is very common. However, the process can be confusing as there are several routes to transfer property ownership. There are also tax implications for gifting a property under the full market value. Read more about this here in Capital Gains Tax on Gifted Property for Married Couples and Capital Gains Tax on Gift of Property to Children. In this article we focus on how to gift property to children and other family members. There are 4 ways to gift your property:

    1
    Sale and Purchase at full market value
    2
    Sale and Purchase at under market value
    3
    Deed of Gift, also known as a 'Transfer by Way of Gift'
    4
    Transfer of Equity

How do you choose which route to go?
When transferring ownership of property from parent to child, spouse or family member you need to choose the quickest and most affordable route. Here's how:

  • The transfer is for full market value. This is a standard sale and purchase.
  • The transfer is gifted for under market value but for some consideration. This is a standard sale and purchase but if the buyers are getting a mortgage they need the mortgage lender to provide a concessionary mortgage offer.
  • The transfer is gifted for no consideration. This is a deed of gift as long as there is no consideration, no mortgage and you want to transfer ownership to a family member.
  • The transfer keeps one of the original owners on the property. This is a transfer of equity.

We run through the legal process for each of the above routes to transfer property ownership below.

Gift from parents tax and risks?

These are the tax and risk considerations for gifting property to children:


We have tax advisors to run through your specific tax implications at competitive prices.


What is the legal process to gift property to your family?

Here is the process for each of the ways you can transfer ownership of house to family members:

    1
    Sale and Purchase for Gifting a House
Whether the transaction is for full market value, or under market value, if you are gifting property with a mortgage then you'll need to follow the normal sale and purchase process. Here are the key stages:

  • Seller and buyer get independent solicitors
  • Seller completes standard protocol forms such as fittings and contents forms
  • Buyer gets their mortgage offer
  • Buyer orders searches
  • Exchange and completion

The conveyancing process will take the normal time to get to exchange because you are getting a mortgage and ordering conveyancing searches from the council. Crudely estimated at 4 to 8 weeks, however if it is a leasehold then it will take longer as the seller needs to get the leasehold management pack.

Fixed Fee | Excellent Trustpilot Rating | Gifting Property Specialists | On all Mortgage Lender Panels

    2
    Deed of Gift/Transfer By Way of Gift
The parties leaving the title are unrepresented, unless they choose to get a solicitor, and the process is as follows:

  • New owners get a solicitor to handle the transfer
  • TR1 is drafted and sent to the Transferor (current owners) and Transferee (new owners)
  • Current owners get their ID1 form verified by a solicitor and obtain independent legal advice regarding the Transfer.
  • Completion takes place

This process of gifting a house is completed a lot quicker, normally 3 to 4 weeks. The part that can take the longest time is getting the ID1 verified and the legal advice on the transfer; especially if the current owner lives overseas. We can get your ID1 form verified so please get in contact if you need any help.


    3
    Transfer of Equity

Where one or more of the original owners are going to remain on the legal title the transfer can take place as a transfer of equity. The party leaving the title is often unrepresented.

  • New owners and remaining owner use the same solicitor
  • TR1 is drafted and sent to the current and new owners
  • Leaving owner gets their ID1 form verified by a solicitor
  • Completion takes place

A Transfer of Equity takes a similar time to complete as a deed of gift, however can take longer if the property is leasehold or there is a mortgage that requires the lender's consent to add the new parties onto the mortgage.

Click to get an Online Transfer of Equity Quote

Frequently Asked Questions

The solicitor who is transferring ownership of property from parent to child, spouse or family member, can complete your land registry change of ownership forms.

The fee is payable based on the property's actual value; not the consideration being paid. So if you change Land Registry ownership on a property worth £500,000 but the consideration changing hands is nothing, the Land Registry fee will still be based on the £500,000.
  • Property not mortgageable: Without carrying out due diligence such as searches, investigating title and carrying out the checks the new owner could be left on the title of a property that can't be mortgaged or sold at full market value.
  • Care home : Transactions can be reversed if the local authority views the transaction as a deliberate deprivation of assets.
  • Bankruptcy : Transactions can be reversed if the parents gifting are made bankrupt within 5 years of the transaction.

HMRC have stated that parents may still be liable to Capital Gains Tax if the property being given is their second home. The only way to avoid this is via the Private Residence Exception (Principal Place of Residence), meaning the property has been/is occupied by the parent as their main home.

Stamp Duty Implications
The child would also attract Stamp Duty whether the transaction is a Transfer of Equity or a purchase. On a Transfer of Equity, if the consideration being paid when added onto half the outstanding mortgage exceeds the limit then Stamp Duty is charged at the usual rate.

If the child is completing the purchase as a Concessionary Purchase, then stamp duty is payable on the amount stated within the contract. This amount depends on what the mortgage lender states. In most cases the mortgage lender allows for the concessionary purchase price to be used, however some use the full purchase price.

Online Calculator | No need to provide personal details to get the results

For tax advice on gifting property to family you should always speak to a tax specialist.
When transferring ownership of property with a mortgage, where the buyers are using the mortgage to pay the buyers, they'll need to get an undervalue mortgage offer.
For example: The property is worth £500,000 on the open market. However, the buyers are getting a mortgage for £250,000 and this is all they are paying (the total consideration). The mortgage lender must be informed this. The mortgage lender will state within the mortgage offer that they are aware the property is being sold under market value.

If the mortgage lender doesn't confirm it is an undervalue mortgage offer then your solicitor will need to reflect the full purchase price in the contract of exchange and SDLT will be payable on the total price. Read more about Concessionary Purchases and what you need to do.

Gifting property with a mortgage means that the transaction must be a sale and purchase because the mortgage lender will require standard conveyancing protocol to be followed by the purchasing solicitor.
Property can be transferred for full value, under market value and for no consideration at all. A property can transfer for whatever is agreeable between the seller and the buyer, although there are implications to consider such as capital gains tax, stamp duty land tax and if the buyers need to get a mortgage within the first 6 to 12 months after the property has been gifted.

 
 
mortgage gift

Gifted Deposit? Or is it a loan from your parent?

26/04/2020
54,517
Concessionary Purchase

Concessionary Purchase

28/11/2018
24,965
new-conveyancing-process.png
FREE Online Conveyancing Process for Buyers

Includes online checklists, videos, downloads and tips - plus it is completely free to use from start to finish and saves your progress along the way.