Who files the Land Registry change of ownership form?

The solicitor who is transferring ownership of property from parent to child or spouse 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.

What are the pitfalls of gifting a property?

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.

What are the Tax implications when Gifting Property?

Capital Gains Tax on Gift of Property to Child HMRC have stated that parents may still be liable for 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 on Gifted Property 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. Use our Stamp Duty Calculator For tax advice on gifting property to family member, you should always speak to a tax specialist.

How much under market value can you gift the property?

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.

What is the 7 year rule for gifting property?

If you transfer ownership of house to a family member and live on for 7 years after the gift is made, there are no inheritance tax implications. If you pass away within 7 years, your children will be liable for inheritance tax.

Can I sell my house to my son for £1?

Gifting property to son for £1 is possible, although it will be treated as a gift. Legally, you will still need to go through the entire conveyancing process and instruct a conveyancing solicitor to handle the "sale". Since you're transferring ownership of property from parent to child, there will still be tax liability involved, so this will not help you avoid paying capital gain tax or any other costs involved. We can help refer you to a tax professional to help with your tax planning purposes.

Our experienced conveyancing solicitors can help with quickly transferring ownership of property from parent to child, spouse or family member, no matter the transaction type.

Your fully trained conveyancing executive will talk you through your options and look after your transaction from start to finish.

Find out more

Gifting Property to Children

by:

Andrew Boast

Created on:

21/09/2021

(Last Updated: 28/03/2024)

Read by:

3,915

9 min read

Key Takeaways

You can transfer ownership of house to a family member or spouse, but this will attract gift tax on property transfer, such as capital gains tax.
To achieve the gift transfer, you can make a standard sale and purchase, a deed of gift, or a transfer of equity, whichever suits your circumstances.
If a mortgage on the gifted property exists, you will need a mortgage agreement from the lender.

Gifting property to children, spouses, or civil partners is very common. However, the process can be confusing as there are several routes for transferring property ownership. There are tax implications for gifting a property under the full market value. Read more about this in: Capital Gains Tax on Gifted Property for Married Couples and Capital Gains Tax on Gift of Property to Children.

This article focuses on how to gift property to children and other family members.

In this article

Can you gift property to a family member?

Yes, when transferring property ownership from parent to child, spouse or family member, you need to choose the quickest and most affordable route.

There are four ways to gift your property:

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

Gifting property with an existing mortgage

When transferring property ownership with a mortgage, where the buyers are using the mortgage to pay the sellers, 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 of this. The mortgage lender will state within the mortgage offer that they know 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 cost. 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.

What is the legal process for gifting property to your family?

We run through the legal process for each of the above routes to transfer house ownership to a family member or spouse.

1
Sale and Purchase for Gifting a House

Whether the transaction is for full market value or under, if you are gifting property with a mortgage, you'll need to follow the normal sale and purchase process. Here are the key stages when selling property to family:

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 standard 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, it will take longer as the seller needs to get the leasehold management pack.

We can handle the entire process, from conveyancing to arranging access for your surveys and ordering searches for you.

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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 for gifting a house is completed much quicker, usually 3 to 4 weeks. The longest part is getting the ID1 verified and getting legal advice on the transfer, especially if the current owner lives overseas. We can get your ID1 form verified, so please contact us if you need help.

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3
Transfer of Equity

Transfer of Equity Process explained by SAM Conveyancing

Where one or more of the original owners will remain on the legal title, the transfer can occur 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, it can take longer if the property is leasehold or there is a mortgage that requires the lender's consent for adding children's names to house deeds/mortgage.

Get a Transfer of Equity Quote
Average costs from £363 INC VAT

Gift from parents tax liability and risks?*

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

Insolvency
The transaction could be voided if you are made bankrupt within five years of gifting a house.
Inheritance Tax Payable
If you die within 7 years of gifting a house, then the gift is taken into account when assessing your tax liability for inheritance tax purposes. In this case your estate would have to pay inheritance tax on the value of the gift, as a percentage of the market value at your time of death.
Capital Gains Tax Implications
Suppose the property isn't your principal place of Residence, and you are gifting the property to a connected person. In that case, you have to pay Capital Gains Tax on the property's market value, not for the gifted amount.
Care home fee avoidance.
If you are gifting your property to avoid care home fees, then this could be viewed by the local authority as a deliberate deprivation of assets.
You need the money back.
A gift is not a loan, and you have no legal right to enforce the repayment of the gifted property. Read more here - you make a loan instead of transferring property ownership from parent to child. How do I avoid capital gains tax on gifted property? *

Do I have to pay capital gains tax on gifted property?

Capital gains tax is payable on the market value of property or percentage of the property being gifted.

In certain circumstances, You can avoid paying capital gains tax charges if you transfer ownership to a spouse or gift the property to a charity. Read more about the exceptions - Capital Gains Tax on Gifted Property.

We can refer you to a tax advisor to review your tax implications at competitive prices.

Need tax advice on your property transaction?

Get up-to-date property tax advice on SDLT, CGT, IHT, Personal versus partnership versus company structures
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

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Written by: Andrew Boast

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.

Reviewed by: Caragh Bailey

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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