Rebecca Towey

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Gifting your Home

Wealth Preservation / 12 November 2021

Many people consider gifting their home to their children or another relative in the hope of reducing their inheritance tax (‘IHT’) liability when they die.  However, the rules on gifting are complex and there could be other tax consequences of the gift.  Caution should be exercised when considering whether to make a gift of property that is your main residence.

Gifting your home during your lifetime may reduce the value of your estate in certain circumstances.  For the value of the property to fall outside of your estate, you must take no benefit from the property following the gift, and you must survive the gift by seven years.  If you gift your property and continue to live in it, you will be subject to the ‘gift with reservation of benefit’ rules (‘GROB’) and the property will continue to form part of your estate on death for IHT purposes.

You may continue to live in the property, and avoid GROB, if you pay rent to the new owner, Steps must be taken to ensure that the rent is at a market rate and it should be reviewed every year.  Evidence of rent being paid and reviews taking place should be kept, as HMRC may request this when assessing your IHT return.  Even if you do not continue to live in the property you have gifted, you must be careful to not benefit from it in any way in order to not be subject to GROB.

You should also consider whether making a gift of property in your lifetime will lead to the loss of any inheritance tax reliefs which your estate may otherwise be entitled to claim.  For example, the residence nil rate band (currently £175,000) can be applied to estates in certain circumstances but this relief may be lost if you have already gifted your property.  Depending on the circumstances, this could inadvertently lead to an IHT liability.

There may also be other tax consequences such as capital gains tax (CGT).  When a person sells a property, they will be subject to CGT on any increase in value since the date of purchase. If you sell your main residence, principle private residence (PPR) relief applies, and no tax liability will arise.  However, if you gift your property and it is not the new legal owner’s main residence, PPR could be lost leading to a CGT liability which will be taxed on the new owner.

There are other reasons why you may wish to gift your home, such as trying to provide security for a loved one who may live with you or because of concern about future care home fees.  Deprivation of asset rules are in place meaning you cannot gift your home simply to avoid paying for your care.  If you do make the gift and are subsequently found to have broken this rule, this could lead to difficulties in how your care is paid for.

If you are gifting your home because you are concerned about what will happen to a loved one who lives with you after your death, other options such as lifetime trusts or trust arrangements through your Will may be more effective and appropriate than making an outright gift to someone.


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This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. This update relates to the prevailing circumstances at the date of its original publication and may not have been updated to reflect subsequent developments. If you have general queries about our updates, please email:

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