The CGT, stamp duty and inheritance tax rules for gifting property to your children

When you pass a property on to your children it is regarded by HMRC as though you had sold it for its full market value, even if no actual money changes hands. The tax you pay will depend on your individual circumstances, since this is general information and not advice, so you should obtain proper advice before signing anything.

Capital gains tax comes first

A gift constitutes a disposal and is assessed at market value on the date that the gift is made rather than at the amount your child pays. When the property was your principal residence during the period of your ownership, private residence relief generally results in no capital gains tax; the case is different if the property was a buy-to-let property or a second home.

The amount you gain is equal to the market value less the amount you paid, minus the costs of buying and improvements. For gains realised from 6 April 2026, the rates are 18% for those within the basic rate band and 24% for those above it, and in the tax year 2026 to 2027 the first £3,000 of gains is exempt.

Here's an example: suppose you purchase a rental flat for £120,000 and it is worth £260,000 when you give it as a gift; the amount of gain in this case is £140,000, and after deducting the £3,000 exemption, a taxpayer in the higher rate bracket pays 24% tax on £137,000, that is to say £32,880. The gain on a UK residential property must be reported and paid within 60 days of completion, a deadline that comes sooner than most families anticipate.

Stamp duty only bites if debt changes hands

In England and Northern Ireland genuine gifts, provided that nothing is given in return, are not subject to stamp duty land tax. However, if your child takes over part or all of a mortgage the debt that they take on is regarded as consideration that is chargeable and stamp duty therefore has to be paid. In Wales and Scotland their own property taxes are administered with different rates.

Suppose you give someone a house and your child then assumes the mortgage of £180,000. In this case, the stamp duty comes to £1,100: there is no charge on the first £125,000 and 2% is applied to the remaining £55,000. If your child already owns another property then the 5% extra rate is applied on top of each band, which increases the amount by £9,000 and makes the total £10,100. Also, receiving a share in a property can use up your child's first-time buyer relief for later use, a point which is easy to miss.

Inheritance tax and the 7-year rule

A direct gift is considered a potentially exempt transfer, meaning that if you survive for seven years after making it and the gift is not included in your estate when inheritance tax is calculated, it will not be subject to tax. However, if you die within seven years, the gift will be taken into account, the rate of tax being reduced by taper relief on a sliding scale from year 3 to year 7, provided that the total value of the gifts goes beyond the £325,000 tax-free limit.

The actual damage is caused by two methods. If you give the house to your child but continue to live in it free of rent, this amounts to a gift with reservation, meaning you remain in the property for as long as you live; the accepted way of getting out of the situation is to pay your child the full market rent. If you sell the property to your child at a cheap price rather than giving it to them outright, the discount is treated as a gift for inheritance tax purposes, although the capital gains tax is calculated on the full market value.

Get the valuation evidenced on the day

The market value at the time the gift is made is what determines everything in this situation, and HMRC has the possibility of checking your figure by carrying out a post-transaction valuation review. A RICS valuation that is obtained for the date of the transfer has the effect of fixing the calculation of CGT, the stamp duty position and the eventual inheritance tax record all at the same time. The transfer itself requires a deed, registration with the Land Registry and the consent of your lender if a mortgage is to remain in place; a conveyancer looks after this aspect and you can compare online the quotes for conveyancing in the case of a transfer of ownership.