Legal transfer of property

Inheritance Tax threshold

If your total estate (including your home) is worth more than the Inheritance Tax allowance (up to £450,000 in 2018–19 in the UK), the government will take 40% of the value of the estate in excess of the available threshold in Inheritance Tax, reducing the amount that goes to beneficiaries. 

One exception may be if you previously inherited the assets of your deceased spouse or civil partner, and they did not use up all of their own Inheritance Tax allowance. In this case you may have inherited some or all of your spouse’s/civil partner’s allowance, granting you an Inheritance Tax allowance of up to £900,000. This is called transfer of the nil-rate band.

If you live for seven years after gifting the house (no matter what it’s worth), it will not be included in your estate for the purposes of Inheritance Tax.

Read the Which? Money guide to Inheritance Tax, which explains rates and thresholds in more detail, as well as the rules for married couples and civil partners. 

Sharing a home

If you give half of your home to your children, who then move in and share the bills, the half that you have given away won’t be treated as part of the estate for Inheritance Tax purposes – as long as you live for seven years after making the gift.

Gifts with strings attached

If you give your home to your children with conditions attached to it, or continue to benefit from the home by living in the property, this is known as a ‘gift with reservation of benefit’. This means that the gift will still be included as part of your estate for Inheritance Tax purposes when you die, even if you live for seven years after making the gift.

Gifting a home 

You could make social visits to the home that you gave away and stay for short periods. But there are guidelines as to how frequent the visits can be without the home again becoming a ‘gift with reservation of benefit’.

You could continue to live in your home after giving it away, provided that you pay a market rent to the new owner. Bear in mind that the new owner may have to pay Income Tax on the rent they receive.

If you live in the home without paying market rent, the gift will be considered a ‘gift with reservation of benefit’, and the house may be included as part of your estate for Inheritance Tax purposes.