The Tax Implications of Gifting Property

A gift of property to a loved one is a generous gesture. However, if you’re considering making a gift, be aware that it can come with some complicated tax rules that depend on who you’re gifting the property to and whether you use it as your main home.

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Capital Gains Tax

If you’re giving property as a gift to a spouse, including a husband, wife or civil partner, as long as you’re not separated and have been living together for the whole of that tax year, you won’t have to pay Capital Gains Tax (CGT). However, if your partner subsequently sells the property that you gifted, they’ll have to pay CGT. This is calculated using the difference between the value of the property and the price at which you originally bought it and the rate at which your partner pays tax.

If you’re gifting property to your children, you won’t have to pay CGT either, as long as your home has been your main residence for the entire time you have owned it. CGT is payable if the property you’re gifting is a second home or property that was bought for letting. Another consideration is whether or not a mortgage still exists on the property. If you’re gifting a property that still has a mortgage, think carefully as to whether it’s an appropriate gift for your beneficiary. They will be expected to pay stamp duty on the outstanding mortgage, and they will also need to undergo checks by their bank or building society to make sure they are able to comfortably keep up with the repayments.

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Inheritance Tax

Inheritance tax is paid on the value of a person’s estate after they’ve died. It’s payable on anything that exceeds a certain threshold – currently £325,000 at time of writing. A common reason for gifting property is to keep inheritance tax as low as possible, but there are situations where no inheritance tax is payable. If you pass your property to a spouse, for example, no inheritance tax will be due. However, if you leave property in a will, or gift property to your children and die within seven years of making that gift, some inheritance tax may still be payable based on the number of years have elapsed since you made the gift. The amount of tax payable reduces as each year passes, which is known as ‘taper relief’. For current information on inheritance tax including making gifts of property, go to

It’s also a good idea to seek the advice of a tax or financial adviser to help make the decision that’s best for you and for your beneficiaries.

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