7 Things You Should Know About Giving Your Home To Your Children

Do you want to gift your home to your children?

You are permitted to give your home to your children (or another beneficiary) at any time – even if you live in it.  However, if your home and your estate are worth more than the Inheritance Tax threshold (£325,000 in tax year 2010/11) there may well be tax implications.

Our guide outlines seven things you should know when considering giving your home to your children.

Seven-year rule

Giving your home away is treated (for Inheritance Tax purposes) as ‘making a gift’.  When passing on property, there are two things that you should be aware of.  The first is the ‘seven year rule’.

You can make an outright gift of your home to someone, irrespective of its value, and it will be exempt from Inheritance Tax if you live for seven years after making the gift.  This is known as a ‘potentially exempt transfer’ (PET).

Gifts that you continue to benefit from

The second important thing to be aware of is the idea of a ‘gift with reservation of benefit’.

If you give your home to your children with conditions attached to it, or if you continue to benefit from the home yourself, this is known as a ‘gift with reservation of benefit’.  In this case, the gift won’t be exempt from Inheritance Tax, even if you live for seven years afterwards.

Giving your home to your children and moving out of it

As we have seen above, you cannot gift your home and then continue to live in it without it remaining part of your estate.  You are permitted to make visits and to stay for short periods in the home that you gift, but you cannot remain permanently.

Giving your home to your children and continuing to live in it

If you gift your home to your children, you can continue to live in it as your main residence as long as you pay a market rent to the new owner.  You should bear in mind that the new owner may have to pay Income Tax on the rent you pay them.

If you don’t pay a market rent, the gift will be considered a ‘gift with reservation of benefit’ and the house may be subject to Inheritance Tax.

Selling your home and giving the proceeds to your children

Instead of gifting the property to your children, you could sell your home and gift them the proceeds from the sale.  In this case, the gift won’t be included in your estate for Inheritance Tax purposes, as long as you live for seven years after you make the gift.

However, if you sell your home, give the money to your children and then move into their home, there could be Income Tax implications.  You may be classed as ‘living in a pre-owned asset’ if you do not pay the market rent.

Gifting your home to your children who then move in with you

If you give your home to your children and they then move in with you, the gift will be treated as a ‘gift with reservation of benefit’ and the home will still be subject to Inheritance Tax.

However, if you give half of your home to your children, they move in with you and you share bills jointly, the half that you give them won’t be treated as part of your estate for Inheritance Tax purposes as long as you live for seven years after making the gift.

Capital Gains Tax on a home you gift to your children

As long as the home you give away is your main home, Capital Gains Tax won’t be payable.

However, if you give away a second home, Capital Gains Tax may be payable if the property has increased in value between when you first owned it and when you gave it away.


  1. Robert says:

    Hi. I want to put my house in trust and move out so my daughter can move in with her family. She currently gets housing benefit and DSS. If she rents through the trust can she still continue to claim her current benefits. She currently lives in private rented accommodation.

  2. d. harrison says:

    The end of my financial year is 28th February.
    I purchased a bulk delivery of fuel in February.
    paid for in march My accountant says I cannot
    claim for it,as it is classed as stock.

  3. Deb5566 says:

    Hi I am wanting to buy my 80yr old Mams house. I will pay the full market value for it so she is not gifting it to me. However she will remain to live with us.

    Just went to get a mortage from TSB and they said this is against the law?

    Anyone got any advice please, as I have already sold my house. Many thanks Deb

  4. Elizabeth king says:

    Can I sell 25% to my daughter! which would clear my mortgage! then gift her 25% and her sister! I would retain 25% and continue to live in the property? Until I died or needed residential care? I am 69. There would have to be a condition that if either sister pre-deceased me, or divorced, there share would be held in trust for their children until the property had to be sold, either I died or went into residential care. Many thanks

  5. heather says:

    my mother wants to gift her home to me. she then wants to move into rented accomodaton, will she still be able to receive benefits such as housing benefit and pension credits

  6. patricia says:

    can I will my home to daughter without son in law getting access to the money

  7. mrs h riley says:

    can me and my husband sign over the deeds from our house to my daughter and still live in it

  8. Darren says:

    Can I buy my dads £160k flat from him for £65k .what are the legal requirements

  9. christina hills says:

    Hi – in 2010 my Dad gave me some money for a deposit for a house my husband and I bought for my dad to live in (he has paid rent of the amount of the mortgage) dad also paid for the updating of the house including total rewire/new kitchen etc and he pays for any maintenance it needs. the house was bought for 168k and is now worth 225k (with a mortgage of 126k). the thing is my dad now wants to buy the house for whats outstanding on the mortgage and as its my 3rd property I am worried about the cap gains implications but dad says that would not have top pay it as could say the property was always going to be his – is this correct or would we have to pay cap gains??

  10. Jane Gibson says:

    My other wants to gift her house to her five children but continue to live in it. If she then becomes ill and needs to enter a nursing home would we have to pay for her care? The property is worth approx £ 140,000.

  11. Selling to sibling. says:

    What is the cheapest I can sell my house to my daughter? Valued at £200,000. Without incurring cost penalties or at least keeping them low.

  12. William Ramsay says:

    My wife and I helped my son, wife and two children buy their own house. Due to his credit rating (misspent youth!)we took out the mortgage in our name for which he has been paying each month(via us). We would now like to pay off the mortgage … such a waste paying interest. Once paid off we in affect would loan them the outstanding balance and they continue to pay us each month, less the interest charge. We would like to also transfer the deeds to them so it is in their names.

  13. p.m. taylor says:

    I am confused, if I gift my house to my child and continue living in it paying a market rent is it still subject to inheritance tax after seven years? I am well above the inheritance tax level.

  14. S.Chapell says:

    My mother owns and lives in a property valued at 125k and wishes to either sell and gift the proceeds or gift the property to me. The proceeds are to be combined with my savings to buy a larger property and my mother will move in with me.
    Can you advise on the best method, sell and gift the money or gift the property and i sell it.
    Regards, S.Chapell

  15. Jackie says:

    My parents have sold their house and are looking for another while staying with me. Can they give me the money and I buy the new property for them to live in?

  16. Caren says:

    I would like to gift my home to my son, who is 22 and who will continue to dwell there. I, myself, will move out. However, the property still has an outstanding mortgage which will continue to be paid by my son — even though the mortgage is still in my name. I realise the risks but I see this likened to being a guarantor for my son’s mortgage, whereby I am legally responsible and could stand to lose out should my son default on the mortgage. I would like to know if it is legally possible to gift a property which still has some remaining mortgage
    Thank you.

  17. Richard says:

    Does the 7 year rule also protect against any future nursing home costs?

  18. d hulse says:

    if my grandson buys my house cheap with a mortgage do i have to move out

  19. sadiq says:

    I had joint ownership with my late son whats the
    the states of his widow now does she get the share automatically

  20. christian says:

    My mother gave me 75 percent of the house we live in she has 25 percent she hs lived more then 7 years but we have extended house do i have to pay tax when we sel it

  21. james says:

    can i change our house deeds from our daughters back to mine and my wifes so we can move to a smaller houes owing to ill health .is there any tax we will be liable?

  22. Anne says:

    If I give my children who live abroard, money to buy a property, then I move into this property, are there any tax implications.

  23. DEBBIE says:

    My in laws jointly own their property on a tenants in common basis 50/50. My mother in law has recently passed away and her share has gone into trust for the benefit of my husband and his sister. My father in law now wants to move into rented accommodation. Is it best for him to sell at a reduced price or transfer the property as a gift. The value of their joint estate is approx £400k. If transferred and we then made that property our main residence, I presume no CGT would be payable?

  24. T says:

    I own 2 properties, one which I live in worth approx’ £150,000 and one which I currently rent out worth approx’ £150,000. I would like to sell my second property and give the cash to my daughter. Will I have to pay any taxes in doing so?

  25. Michael Docherty says:

    My nanna died 4 years ago and her house automaticaly went to my mam. At this time me and my family were desperate for a home so we were able to move in. My mam remortgaged her home so we could extend this house to accomodate our children. The house was worth around £75000 at that time but there have been around £25000 worth of improvements made since.

    What does this mean if i want to buy it from my mam or if my mam wants to ‘give’ this house to me? My mam is retired so is fearful of huge tax bills. What is the best way forward?

  26. H Norfolk says:

    My mother wishes to pass her home to me while she is still alive.
    She finds the house too much of a worry now, and does not wish my sister or her children to inherit anything.
    This is due to family problems (sister has broken off all relations with us both, and the situation is totally irrevocable).
    What is the best way of doing this?
    My mother is 77 and not in good health. My father died in 1987. There is no mortgage.
    The house is worth about £130k.
    I would wish her to live in it for as long as she wishes or is able to.

  27. T. Gibb says:

    My step father died a year ago without leaving a will.He had been living with his new wife for about 7 years,renting out the house that he owned and lived in with my late mother for 20years+ His new wife is gifting myself and my sister this house. It was valued at the time of his death at between 290.000 and 350,000 with a mortgage on it of 155.000.My husband and I decided to buy the property and agreed with my sister to buy it for 320.000.And to pay her 82.5k. We are currently selling our old house to do this. My question is will my step fathers wife have pay capital gains tax when my stepfather owned and lived in this house for 20years + before he let it and the house and mortgage was in his name and not hers.Also will myself and my sister have to pay anything. Also if it takes a long time to sell our house and the sale is delayed will that affect the amount that will have to be paid. Thankyou

  28. James ghuma says:

    I gifted a property to my sister inlaw three years ago and she lives in Qatar.
    Now i would like to buy it of her.
    Will she be liable to UK CGT.



  29. Raan says:

    can a property that had already been gifted be revoked?
    If so how long do I have to do it?

  30. hazel mc,kinney says:

    My husband and i are in our late 70s thinking of selling our bungalow giving the money to my daughter and moving into rented property.Can we do this without the goverment interfering.

  31. malcolm says:

    My father signed across the title deeds of the house to me 9 years ago but continued to live in it as his till his death. I now wish to sell it. What tax do I have to pay on it.

  32. John Stephens says:

    Continued/…it now appears that although the gift of two thirds of my original home (now two properties) was effectively their rightful inheritance from their mother, that my sons would now have to pay IHT because of this unfair gift with reservation of benefit rule. Is there anything I can do to mitigate this even if it means taking back what i have given into my estate? My sons could contest that I have had the burden of ‘maintaining’ these properties do where exactly is the many benefit? Why is the ruling only mitigated by paying rent instead?

  33. John Stephens says:

    Gift with reservation of benefit: My wife died 12 years ago and since then I downsized and moved house and at the same bought another property with the proceeds to let out ( this was and still is providing an income ad I can no longer work to an accident as a pedestrian which caused a back injury) time included my two sons on the deeds thus effectively gifting two thirds of the home to them. The reasons behind this was nothing to do with IHT but to prevent any future wife (of mine) from taking all after my death and likewise in a potential divorce, protecting my estate from being unnecessarily eroded. part of home I live in

  34. Alan Goussaert says:

    When my daughter seperated from her husband, I brought a house for her and my grandchildren to live in. That was 9 years ago and I have not received any rent or financial benefit from it. In fact I have been paying the insurance on it. I would now like to gift the house to her. It cost me £126,000 and is now worth approx £160,000.

    • Thakorlal says:

      I want to give my son a house that I bought for him to live.he cannot afford to buy.he has lived there as his main residenc since 2002although the property belongs to my wife and I..when we transfer it to him will we be assessed for capital gains tax.no money will change hands and he is my part of my family but he lives separately to me.i know inheritance tax is not applicable if after I donate live for seven years but what is the position of capital gains tax as the property was bought in 2002

  35. Desmond John Whitney says:

    I own my house with 6 years of mortgage left on it.
    My aim is to give it to her and live in it and pay mortgage.I have been ill and wish to ensure that my daughter gets as much of its value as she can in case I get put in a home etc.
    I live alone and have been in receipt of DLA, Incapacity Benefit and a small pension for the past 11 years as I have Bipolar Disorder and was told by a consultant that I have at least an 80% probability of having Aspergers Syndrome by letter in June 20011. I have thought about this for a considerable time but was unsure about what steps were required to be taken.
    Many Thanks, Des Whitney

  36. Kevin McMahon says:

    I helped my daughter buy a flat 7 years ago. She put in approx 50% deposit (£30,000), I took out a mortgage for the rest. I have since paid off the mortgage, and now want to gift the flat to my daughter (who has lived in it on her own). Which is the best way to do this. The flat originally was £60,000 and is now only valued at around £63,000.

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