Can I Give My House To My Children?

Are you thinking about inheritance tax and wondering, can I give my house to my children? Gifting a property to your children can be a complex process with various considerations to keep in mind. 

In this insight will explain the key things to consider when gifting a property to your children, including potential tax implications and the process of transferring equity. 

Key Takeaways

• If you give your house to your children, they could potentially become liable for inheritance tax.
• You can offset any IHT liability with a gift inter vivos insurance policy.
• If you have a mortgage, you will need to transfer the equity to your children, but they must be over 18.
• Speak to a financial adviser to determine your tax liabilities and whether a transfer of equity is required.

Can I Give My House to My Children?

Yes, you can gift your house to your children. However, there are a few things you should be aware of, such as capital gains and inheritance tax, as well as legal fees, tenancy agreement or mortgage complications:

Capital gains tax

If you own the house and you sell it to your child at a lower price than its market value, you may be liable for capital gains tax on the difference between the sale price and the market value.

Inheritance tax

If you give away your house as a gift and you die within seven years since making the gift, the house may be included in your estate for inheritance tax purposes. For more information on the 7 year inheritance tax rule, read : What is the 7 Year Rule In Inheritance Tax?

Mortgage complications

If the house is subject to a mortgage, you will need to get the mortgage lender's permission to transfer the property to your child.

Tenancy agreements

If the house is rented out, you will need to make sure that any tenancy agreements are transferred to your child.

Legal fees

You will need to pay legal fees to transfer the house to your child.

Before deciding how to proceed, its a good idea to spend some time inheritance tax planning.

Can I Give My House to My Children and Carry on Living in it?

Yes, it is possible to gift your house to your children and continue living in it. You could do this through a life tenancy agreement, by renting the house from your children, or by entering into a lease agreement with them. Keep in mind that you will no longer be the legal owner of the property and will need to respect the rights of the new owners.

Can I Sell My House to My Children?

Yes, you can sell your house to your children. However, you should be aware that you may be liable for capital gains tax on the sale if you sell the house to your children for less than its market value. 

If I Sell My House to My Children and Carry on Living in it, Do They Need a Buy to Let mortgage?

If you sell your property to your children and they need to raise a mortgage, it would be possible for them to apply for a buy to let mortgage or a residential mortgage. A residential mortgage is acceptable as you are an immediate family member living in the property. You will need to notify your solicitor of your intention to remain in the property.

Although a residential mortgage may be cheaper than a buy to let mortgage, an affordability assessment will be required and that might make it harder to qualify for it.

Choosing a Buy to Let mortgage would allow for the affordability assessment to be based on the estimated rental income for the property. However, you will need to be paying a rent for this scenario.

Can I Sell My House to My Children at a Discount?

Yes, you can sell your house to your children at a discounted price. However, you may be subject to capital gains tax on the sale if the discounted price is lower than the market value of the house. You should also be aware that the house may be included in your estate for inheritance tax purposes if you die within seven years of the sale. You will need to pay legal fees and may need to get permission from the mortgage lender to transfer the property. It is advisable to seek legal advice before selling your house to your children.

You can protect yourself against the liability by arranging Gift Inter Vivos.

Do I need to Pay Tax if I Give My House to My Children?

There are several tax implications to consider when gifting your home to your children. These include inheritance tax, stamp duty, and capital gains tax.

Inheritance tax

If you give away your home as a gift and you die within seven years of making the gift, the home may be included in your estate for inheritance tax purposes. The inheritance tax threshold is the amount above which inheritance tax becomes payable on an estate. In the UK, the inheritance tax threshold is currently £325,000.

If you survive the 7-year period, there is no tax payable on the gift.

If you sell the property at a discount, and pass away during the 7-years, inheritance tax will be due on the difference between the purchase price value and market value. This would be calculated as the gift amount.

Stamp duty

Stamp duty is a tax that is levied on the transfer of property ownership. If you gift your home to your children, you may be required to pay stamp duty if the value of the home exceeds the stamp duty threshold. 

Capital gains tax

If you own the home and you sell it to your children at a lower price than its market value, you may be liable for capital gains tax on the difference between the sale price and the market value.

Advice on gifting your home to your children

To help you discuss your options and understand the implications of selling your home to your children, you may want to consider working with a mortgage adviser.

A mortgage adviser can help you to understand the mortgage options available to you and your children, and can assist you with the process of transferring the mortgage or paying it off as part of the sale. They can also provide you with guidance on the tax implications of the sale and can refer you to a legal professional if necessary.

Source: Gov UK on Gifts and IHT, Money Helper on Gifts and exemptions

So, Can I give my house to my children? Yes you can, but it's important to seek inheritance tax planning advice first.If you're unsure where to start complete the Sunny Fact Find. The answers you provide help us find the best-suited adviser for your needs. The adviser then contacts you to discuss how they can help. You decide how to proceed.