Transferring property ownership to family members

Last updated: May 2023 | 4 min read

Transferring property ownership to family members is a significant decision and can have implications for both parties involved.

It's important to understand the various ways this can be done, as well as the potential tax implications and risks associated with each option.

This article will help guide you through the process, exploring whether you should transfer ownership during your lifetime or through your Will on death, and the differences between a transfer of equity and a outright gift.

Transfer of equity

Transfer of equity refers to the process where a share of a property's ownership is transferred to one or more people, while the original owner remains on the title deeds.

If you have a mortgage, you'll need to seek permission from your mortgage lender to change the existing mortgage before proceeding with the transfer of equity. The new owner may become liable to mortgage repayments.

Reasons for transferring equity

There can be various reasons to transfer equity, including division of wealth, fairness, and tax considerations. Some common scenarios are:

  • Transferring to a spouse or civil partner: Newly married couples may want to share assets or equalise asset value between partners.
  • Separation, divorce, or dissolution of a civil partnership: Equity may need to be transferred as part of a settlement.
  • Transferring to a child: Parents might want to help their child get on the property ladder, teach them about property ownership, or minimise future inheritance tax.

Joint tenants or tenants in common

Property can be owned either as joint tenants or tenants in common.

Joint tenants own the whole property together, with no distinction as to it being owned half-half. On the death of one of the owners, the property remains wholly owned by the other.

Tenants in common, on the other hand, allows the owners to have specific, unequal shares in the property and then pass their share on after death. If the new owner will not have an equal share, the property must be owned as tenants in common.

Tax implications of transfers of equity

Value of the property at the date of transfer

When transferring equity, you might need a valuation of the property on the date of transfer to calculate taxes.

Capital gains are the difference between the purchase price and the current value.

Since valuations are subjective, it's wise to ask your valuer to be cautious if you want to minimise capital gains tax.

Stamp Duty Land Tax (SDLT)

Stamp duty may be payable if the value of the transfer is over the current threshold of £125,000.

You don't have to pay SDLT if the reason for the transfer is a divorce or dissolution of a civil partnership.

However, you (or your children) will pay stamp duty if you transfer property to them.

Capital Gains Tax (CGT)

CGT may be payable if the transfer is on a property that is not your Principal Private Residence (PPR) or if the transfer is of your PPR to someone other than a sibling, spouse, civil partner, or child.

You won't pay capital gains tax if the property is your only home.

Capital gains can be more complicated to calculate after separation, but you won't have to pay CGT if you've lived together in the property in the tax year (6 April to 5 April of the following year).


Making a gift of property is a common strategy for parents looking to transfer property to their children in order to minimise inheritance tax.

Inheritance Tax (IHT)

Despite the connotation of inheritance tax with death, it is actually a tax on the transfer of assets, albeit one payable after your death.

For reasons that will be explained, if you give your property to a child to save inheritance tax, you should do so at least 7 years before you expect to die. If you give property as a gift during your lifetime, it can be very tax efficient.

Transferring property to spouses and civil partners is exempt from IHT. Transfers to a non-married life partner are not.

Why make a gift of property to a child well before you die

The rate of inheritance tax starts at 40%.

You only pay inheritance tax if the value of your estate is over a certain amount. This amount is the total of your allowances (known as ‘thresholds’) adjusted for transfers you have made in the 7 years prior to your death.

There are two thresholds. The ‘Nil Rate Band’ is £325,000. The ‘Residence Nil Rate Band’ is £175,000 if in your Will you transfer some of your principal private residence to a qualifying family member such as a child.

In short, if you a home owner and you leave your property to your children, you pay tax on your estate only if it is worth more than £500,000 at the date of your death.

Additionally, if your husband, wife or civil partner leaves their estate to you, then you might ‘inherit’ their thresholds as well, giving you a total of £1,000,000.

IHT tax rules are complicated. Tax on transfers made in the seven years prior to your death are ‘tapered’. If you die within 3 years of having made a gift, it will be counted as part of your estate at your death. The value in your estate of a gift made between three years and seven years before your death will be discounted.

Living in your home after gifting it to a family member

HMRC will consider for inheritance tax purposes whether a gift was made with the deliberate intention to avoid inheritance tax.

Similarly, if the reason for giving property to a child or family member is to reduce your assets for care fee assessment reasons, a local authority can consider whether it was done to conceal property wealth (known as a 'deliberate deprivation of assets').

If you remain living in your home after gifting it, you'll have to pay rent in line with the local market rate for the share that you don’t own in order to show that you truly have given it away. You can't live rent free.

Many people think they can avoid paying rent by transferring money to their child and the child transferring the money back as a loan. However, your children will be liable to pay income tax on the rent, which means that they will be unlikely to be able to loan the full amount back.

Risks of gifting property

When you give away something, you give away your legal right to say what happens to it, both during your lifetime and after your death.

Any legal owner can insist that the property is sold, regardless of how much they own.

If you fall out with the new owner, you risk them wanting to sell.

For gifts of property to a child, the risk is less that your child might sell up or evict you, but rather that they lose their ownership in divorce proceedings putting you in a vulnerable position. An ex-spouse might become entitled to half of the share of the property in a divorce settlement, giving them the right to sell.

Another risk is that the new owner dies and the property passes under their Will (or under the rules of intestacy) to someone who has not agreed to continue letting you live there.

If the property isn’t your main residence, then paying capital gains tax might be a risk. This applies to second homes and rental income properties, but also to your home if your children become owners but no longer live there.


Transferring ownership of your home to family members, especially children, can be a way to minimise inheritance tax and help them get a leg up on the property ladder.

However, there are risks and tax implications to consider when you gift property. You may wish to seek advice from a conveyancing solicitor about the process and how to mitigate risks.

Understanding the process and the potential risks will help ensure that your family's wishes are met while avoiding any legal or financial pitfalls.

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