How to Gift Your Property to Children

Gifting property to children is a common strategy for parents looking to assist their family and finalise their estate planning. The process can often feel like a simple name shuffle at the Land Registry, but the truth is far from this.

A gifted transfer can be reversed if a future event occurs, and the Land Registry may not agree to register the transfer if certain legal processes haven't been followed. This is a complete guide to gifting your property to your children, whether for a portion of its value or for no money at all. We will also guide you to other articles that you need to consider, such as whether you are depriving assets for care home fees, or to pay the Pre-Owned Assets Tax if you still live in the property.

Can I gift my house to my child?

Yes, absolutely. You can gift your property to your children for free or for less than its market value. The key requirements are that you must be of sound mind, not acting under any duress, and be the legally registered owner (proprietor) at the Land Registry.

When transferring property ownership to a child, spouse, or another family member, it’s about choosing the most suitable and efficient route for your situation.

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How you complete the gifted transfer to your children depends on whether there is any money changing hands.

• 1

  Transferring Undervalue with a Mortgage

  When your child is taking on a mortgage to buy the property from you, they'll need to secure an under-value mortgage offer. The process follows the standard conveyancing process for a sale and purchase. Mum and Dad will have one solicitor, and the child will have their own separate solicitor. The mortgage lender won't allow for the process to be completed any other way.

Step-by-Step Process: Gifting with a mortgage

Can you skip legal enquiries?

You cannot skip legal enquiries when the buyer is getting a mortgage. The mortgage lender requires standard protocol to be completed, so if there are any enquiries that are going to be troublesome, you'd best be prepared for lenders to require indemnity insurance or full answers to be provided.

What stamp duty is payable on a transfer with a mortgage?

Stamp Duty is payable on the amount you're paying, not the current market value of the property. Use our Online SDLT Calculator to see how much your stamp duty is.

If you do owe SDLT, you must file your return and pay your tax within 14 days of the transfer to your children.

• 2

  Gifted Transfer for no money

  When you're gifting your property, and it doesn't have a mortgage, and you are being paid no money, then this is called a zero consideration transfer. As there is no mortgage lender and the gift is between family, you can complete the process much more simply using the transfer of equity process.

Step-by-Step Process: Gifting with no money

Can you skip independent legal advice?

As the property is being given away for free, the parents will always need independent legal advice. This will ensure your mum and dad are advised on the:

• implications of living in the property after the gift.
• risks of not having enough money for retirement.
• risks of not being able to afford or avoiding care home fees.
• risks of gifting away property and becoming insolvent.

The solicitor must also confirm that the parents are gifting the property without undue influence, and they are of sound mind and know what they are doing. Once the legal advice has been given and the solicitor is satisfied that the parents are aware of the consequences of the transaction, they will provide an Etridge Letter, a confirmation of the legal advice.

What stamp duty is payable on a zero consideration transfer?

You pay no stamp duty if there is no consideration.

What are the risks for a gifted transfer?

As we've seen above, whilst the process can be simple to gift your property to your children, the implications, both tax and risk, can be considerable.

• 1

  Insolvency

  Gifting a property can have implications if you face financial difficulties later. The transaction could be voided if you are made insolvent or bankrupt within five years of making the gift.

This 'look-back' period is designed to prevent assets from being hidden to avoid creditors.

• 2

  Inheritance Tax

  Gifts made between 1 to 7 years where your estate is over £325,000 have a rate of Inheritance Tax to pay. This rate reduces for the gift based on the length of time between the gift and death.
   

  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%

   
  Source: HMRC - IHT - The 7 year rule

• 3

  Capital Gains Tax (CGT)

  If the gifted property isn't your main residence, then the disposal will attract Capital Gains Tax. You may be able to reduce the CGT payable if you lived in the property for any period of time as your main residence. This is known as partial relief.

If you do owe CGT, you must file your return and pay your tax within 14 days of the transfer to your children.

• 4

  Care home fee avoidance

  Gifting your property with the primary intention to avoid future care home fees can be viewed by your local authority as a deliberate deprivation of assets. If this is determined, the local authority may still assess you as if you still owned the property, meaning it could be taken into account for your care costs.

• 5

  You need the money back

  It's crucial to remember that a gift is precisely that – a gift, not a loan. Once you transfer ownership as a gift, you have no legal right to enforce repayment or reclaim the gifted property. If there's any expectation of repayment or a need for access to funds, you should consider a formal loan agreement instead of an outright gift or transfer of property ownership.