What Happens If I Gift a Property to a Family Member

How HMRC views gifting property

For tax purposes, a gift is treated as a disposal — just like a sale. Even if no money changes hands, HMRC assumes the property was transferred at its full market value on the date of the gift.

That means if the property has increased in value since you bought it, you could owe Capital Gains Tax (CGT) on the difference between the purchase price and its market value when given away.

There is no exemption simply because the gift is to a family member. The same CGT rules apply as if you had sold it.

Capital Gains Tax when gifting property

CGT applies when you give away property that is not your main home, such as a rental or holiday property.

For the 2025 26 tax year:

Basic rate taxpayers pay 18% CGT on property gains.

Higher and additional rate taxpayers pay 24%.

If you gift a buy-to-let property, HMRC will treat it as though you sold it at current market value. You will then pay CGT on the profit after deducting allowable expenses and your £3,000 annual CGT exemption.

Example

You bought a flat for £120,000 and gift it to your son when it is worth £220,000. You are a higher rate taxpayer.

Gain: £220,000  £120,000 = £100,000

Less annual exemption: £3,000

Taxable gain: £97,000

CGT at 24% = £23,280

You must report and pay this within 60 days of the disposal if the property is residential.

When you don’t pay Capital Gains Tax

If the property you gift is your main residence, it is usually covered by Private Residence Relief, meaning no CGT is due.

However, if you move out but continue to let it or keep part of it as an investment, the relief may only apply to the years it was your main home. The remainder of the gain could still be taxable.

Transfers between spouses or civil partners are exempt from CGT if you both live together. The receiving spouse inherits the property’s original base cost, and CGT is only paid when they later sell it.

This exemption can be useful for balancing property ownership between couples or managing overall tax liabilities.

Inheritance Tax and the seven-year rule

Gifting a property can also affect Inheritance Tax (IHT). When you give away an asset, it is treated as a potentially exempt transfer (PET).

If you live for seven years after making the gift, it falls outside your estate and is exempt from IHT.

If you die within seven years, the gift may be added back into your estate and taxed at up to 40%, depending on the total value of your estate and how long ago the gift was made.

Taper relief

If you die between three and seven years after the gift, taper relief can reduce the amount of IHT due:

Died within 3 years: 40%

Between 3 and 4 years: 32%

Between 4 and 5 years: 24%

Between 5 and 6 years: 16%

Between 6 and 7 years: 8%

After seven years, the gift is fully exempt.

Gifting property but continuing to live in it

If you give your home to a family member but continue to live there without paying full market rent, HMRC treats it as a gift with reservation of benefit.

This means:

You are still seen as benefiting from the property.

The property’s value remains part of your estate for IHT purposes, even if you live more than seven years after the gift.

To avoid this, you must either:

Pay full market rent to the new owner, or

Move out of the property completely.

If you pay rent, the recipient must declare the income and may owe Income Tax on it.

Stamp Duty Land Tax implications

If the person receiving the gift takes on a mortgage or debt secured against the property, Stamp Duty Land Tax (SDLT) may apply.

HMRC treats the value of the outstanding mortgage as consideration for the transfer. The new owner pays SDLT on the portion of the mortgage they take over.

If there is no mortgage, no SDLT is due.

Example:
You gift your daughter a flat with a £150,000 mortgage. She assumes responsibility for the debt. SDLT will be charged based on £150,000, not on the market value of the property.

Gifting part of a property

You can also gift part of a property rather than the whole thing. This is common when parents want to share ownership with children or transfer a percentage gradually.

Each transfer is treated as a separate disposal for CGT, based on the value of the share given away at the time. If you continue to own part of the property, you will pay CGT later on your remaining share when it is sold or transferred.

Gifting part of a property can also affect future ownership rights, mortgage arrangements, and rental income, so it’s best to get legal advice before proceeding.

Transferring property into joint names

Adding a family member to the title of a property is considered a part gift and part transfer. It can still trigger CGT and IHT implications based on the value of the share transferred.

If the property has an existing mortgage, you must get your lender’s consent before adding another person’s name, as it changes the legal and financial structure of ownership.

Recording and reporting the gift

You do not need to notify HMRC immediately if there is no tax to pay. However, if the gift triggers CGT, you must:

Report the disposal online within 60 days if it’s a residential property.

Pay any CGT owed within the same timeframe.

For inheritance purposes, keep detailed records of:

The date of the gift

The property’s market value at the time

Any rent paid if you continue to live there

This information will be essential for calculating IHT if you die within seven years of the gift.

Practical considerations before gifting property

Before transferring ownership, it’s important to think beyond the tax implications. Consider:

The recipient’s financial situation and potential exposure to divorce or bankruptcy.

How the gift may affect your future living arrangements.

Whether gifting the property could affect your entitlement to state benefits or care funding.

In some cases, setting up a trust or selling the property and gifting the proceeds may offer better long-term protection.

Final thoughts

Gifting property to a family member can be a generous and strategic move, but it carries significant tax and legal implications. You may need to pay Capital Gains Tax at the time of the gift, and the property could remain part of your estate for Inheritance Tax if you die within seven years.

Before making a gift, it’s wise to obtain an up-to-date property valuation and professional tax advice. With the right planning, you can manage both the generosity of the gift and the potential tax exposure, ensuring the transfer benefits your family in the most efficient way possible.