Can I sell my home to a family member?
Key takeaways
When selling your home to a family member the process is similar to a regular sale, requiring a solicitor or conveyancer for legal procedures.
If you sell your home for a cost below fair market value there are several legal and tax implications to consider.
You can gift a property, but you should seek legal advice first. If you continue living there without paying the new owner a full market rent, the property may still be treated as part of your estate for Inheritance Tax purposes.
The standard Inheritance Tax threshold is £325,000, but this can increase to £500,000 if you leave a qualifying home to your children or grandchildren and meet the relevant conditions.
Whether you have a main home or second home you want to give to your children or if you want to sell your home to someone you know for below market value, our guide to selling your home to a family member explains everything.
Can I sell my house to a family member for less than its market value?
Yes. You can sell a property to a family member for less than its market value, including for a nominal amount such as £1. However, selling cheaply does not necessarily mean taxes will be calculated using the price you agree.
The difference between the property's market value and the amount your family member pays can effectively be treated as a gift. This can have implications for Capital Gains Tax and Inheritance Tax, so it is important to take legal and tax advice before going ahead.
Your solicitor or conveyancer will also need to complete the legal transfer of ownership. In England and Wales, the new ownership will normally need to be registered with HM Land Registry.
What are the tax implications of selling a home to a family member?
The tax treatment depends on your circumstances and where in the UK the property is located.
Capital Gains Tax
If you sell or give property to certain family members, HMRC may use the property's market value rather than the amount they actually pay when working out any Capital Gains Tax due.
You will not normally pay Capital Gains Tax when selling a home that has been your only or main residence throughout the period you owned it and qualifies fully for Private Residence Relief. However, Capital Gains Tax could be relevant if, for example, the property is a second home, buy-to-let property or has not always been your main residence.
Inheritance Tax
If you give away some or all of the value of your home, the gift may be relevant for Inheritance Tax purposes.
Be aware that if you continue living in the property without paying a full market rent, it may be treated as a 'gift with reservation of benefit'. This means the property could still form part of your estate for Inheritance Tax purposes.
The seven-year rule can apply to some outright gifts, but it does not automatically remove an Inheritance Tax liability where you continue to benefit from the property.
Stamp Duty
The buyer may also have to pay property transaction tax. In England and Northern Ireland this is Stamp Duty Land Tax, while different taxes apply in Scotland and Wales.
For Stamp Duty Land Tax, tax is generally based on the 'chargeable consideration' the buyer gives for the property. This can include taking responsibility for some or all of an existing mortgage, even where little or no cash changes hands.
Because the tax consequences of selling a property below market value can be complicated, both parties should consider getting professional legal and tax advice before completing the transfer.
Is it better to gift a house to a family member?
Gifting a property is another option. In England and Wales, the legal ownership will normally need to be formally transferred and registered with HM Land Registry.
This is what you need to know before you go ahead:
Check whether there is an outstanding mortgage or other secured debt. You may need your lender’s agreement, and taking responsibility for mortgage debt can affect the tax treatment of the transfer.
Seek legal advice to fully understand the implications.
Consult estate planning advisers for a smooth transaction.
Be aware that if you continue living in the property without paying market rent, it could be considered a 'gift with a reservation of benefit' and may incur inheritance tax.
Mortgage implications and considerations
If there is a mortgage or other secured debt on the property, transferring or gifting it can be more complicated.
You will normally need to contact your mortgage lender before transferring ownership. The lender may need to agree to the change or require the existing mortgage to be repaid or replaced.
If the person receiving the property takes responsibility for some or all of the mortgage, this may count as chargeable consideration and could result in Stamp Duty Land Tax being payable in England and Northern Ireland.
Where a mortgage is involved, the lender may require you to use a solicitor or licensed conveyancer.
Use our mortgage re-payment calculator to see what your repayments will be based on how much you’re borrowing, the interest rate and fees of the deal, and how long you will have to pay it off for. You can also use our mortgage affordability calculator to find out how much you could borrow for a mortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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Author
Rebecca Goodman
Personal Finance & Insurance Expert
Rebecca is an award-winning financial journalist with over a decade of experience writing for print and online media. Her mission is to take the jargon out of personal finance and to help everyone...
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Mel Hunter
Money & Personal Finance Expert
Mel Hunter has worked as a journalist on national newspapers and magazines for more than 20 years. Writing for a wide range of publications, including Good Housekeeping, Woman & Home, The Telegraph...
