Giving a property to your children is a disposal at market value for Capital Gains Tax, so you can owe tax on a gain even though no money changes hands, and a UK residential gain must be reported within 60 days. For Inheritance Tax the gift drops out of your estate only if you survive seven years and stop benefiting from the property. There is no Stamp Duty Land Tax on a pure gift, but a mortgage the child takes over counts as consideration.

Is there Capital Gains Tax on a gift of property?

Yes, potentially. Giving an asset away is a disposal for Capital Gains Tax. Section 17 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) treats a gift as made at market value, and section 18 treats transactions between connected persons, which includes parents and children, as not at arm’s length. The gain is the market value on the date of the gift less what you paid and allowable costs. Your child takes the property at that market value as their base cost. See connected persons for who counts.

For 2026 to 2027 the annual exempt amount is £3,000, and gains are taxed at 18% within the basic rate band and 24% above it. Section 18(3) also ring fences any loss on a gift to a connected person. It can only be set against gains on later disposals to the same person while you are still connected.

Gifts to a spouse or civil partner are different: no Capital Gains Tax is due on them while you live together. A gift of your own main home is usually covered by private residence relief if you have lived in it as your main home throughout and it meets the other conditions. A let property or second home usually is not.

Can the gain be held over?

Usually not for a let property. Gift holdover relief under section 165 TCGA 1992 applies only to business assets, such as an asset used for a trade, profession or vocation, or shares in an unlisted trading company. HMRC’s Property Income Manual (PIM1051) explains that rental income is very unlikely to be trading income, however much time the landlord spends on the lettings. An ordinary buy to let is therefore an investment, and the gain is taxed when you give it away. Our page on gift holdover relief covers the assets that do qualify.

What has to be reported, and when?

Capital Gains Tax on UK residential property must be reported and paid within 60 days of completion, using a Capital Gains Tax on UK property account. If you file Self Assessment returns, you also include the disposal on your return. A UK resident with gains below the annual exempt amount does not need to report online. Because the gain depends on market value, get a professional valuation at the date of the gift. HMRC offers a post transaction valuation check after the disposal. The deadline and penalties are covered on the 60 day property return.

How does Inheritance Tax treat the gift?

A gift of a house or other property to a child is a potentially exempt transfer. No Inheritance Tax is due if you live for seven years after making it. If you die within seven years, the gift counts towards the £325,000 threshold, and any tax on the gift itself is reduced by taper relief if you survive at least three years:

Years between gift and death Rate of tax on the gift
Less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

Taper only helps where the gifts in the seven years before death exceed the £325,000 threshold. The £3,000 annual exemption, plus any unused exemption from the previous tax year, reduces the value of the gift. A parent can also give £5,000 to a child free of Inheritance Tax on their marriage or civil partnership. Selling to a child below market value is treated in the same way: the shortfall counts as a gift.

What if you keep living there or keep the rent?

Then the gift does not work for Inheritance Tax. Under section 102 of the Finance Act 1986, a gift is a gift with reservation if the child does not take genuine possession and enjoyment, or if you are not excluded, or virtually excluded, from the property and from any benefit from it. Property subject to a reservation is treated as still part of your estate. HMRC’s examples include giving your home to a relative but still living there (IHTM14301). Continuing to collect the rent from a gifted let property is also a benefit you have kept.

The rules have some limits:

  • Minor use. IHTM14333 accepts short stays, such as no more than two weeks a year in the child’s absence or less than a month a year with them, and ordinary social visits.
  • Full rent. If you stay on and pay a full market rent, the occupation is for full consideration and is not treated as a reservation (IHTM14341, IHTM14360).
  • Shared occupation. Under section 102B, a gift of a share of a home you both live in is not caught if you receive no more than a negligible benefit from the child connected with the gift.

Is there Stamp Duty Land Tax on a gift?

A transaction with no chargeable consideration is exempt under paragraph 1 of Schedule 3 to the Finance Act 2003, so an outright gift of an unmortgaged property needs no Stamp Duty Land Tax. If the child takes on all or part of an existing mortgage, the debt assumed is chargeable consideration (Schedule 4, paragraph 8; SDLTM04040). Where a share passes, the debt assumed is limited to the share. The residential threshold is £125,000, and the 5% higher rates usually apply if the child will then own more than one residential property. Land and Buildings Transaction Tax applies in Scotland and Land Transaction Tax in Wales instead. See Stamp Duty Land Tax explained.

Who pays tax on the rent afterwards?

Once the property and the right to the income have passed, an adult child is taxed on the rental profits and you are not. A child under 18 cannot hold the legal title to property in England and Wales (Law of Property Act 1925, section 1(6)), so it must be held on trust for them. Under section 629 of the Income Tax (Trading and Other Income) Act 2005, income from a parent’s gift paid to or for an unmarried minor child is taxed on the parent, unless it is no more than £100 a year. See the parental settlements rule.

How does it work in practice?

Illustration only. A higher rate taxpayer gives an unmortgaged flat, bought for £180,000 and now worth £300,000, to an adult son, who lets it out. Purchase and sale costs are ignored, and the parent has no other gains.

  • Capital Gains Tax: gain £120,000, less £3,000 annual exempt amount, leaves £117,000 at 24%, which is £28,080, reported and paid within 60 days.
  • Inheritance Tax: a potentially exempt transfer of £300,000, reduced to £294,000 if two years’ annual exemptions are available. Nothing is payable if the parent survives seven years.
  • Stamp Duty Land Tax: none, because no consideration is given.
  • Income tax: the son is taxed on the rent from the date of the gift.

What are the common mistakes?

  • Assuming there is no Capital Gains Tax because no money was paid.
  • Missing the 60 day reporting deadline.
  • Giving the property but continuing to take the rent or live there rent free.
  • Transferring a mortgaged property without allowing for Stamp Duty Land Tax on the debt.
  • Giving property to a minor child to shift rental income, which the settlements rule reverses.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.