Gifting Property to Family? The CGT Rules You Need to Understand

Thinking of handing a home to your children or another relative? Make sure Capital Gains Tax (CGT) isn’t the surprise gift you give HMRC instead.

Why does gifting property create a CGT bill?

Giving away a house or flat feels like a non-taxable, goodwill gesture. Unfortunately, HMRC sees the transfer as a “disposal for consideration” at market value. No cash may change hands, but the law treats it exactly like a sale. That means any capital gain since you bought (or inherited) the property is potentially taxable on the date you gift it.

So when you read about capital gains tax on gifted property, it’s the same charge you’d face if you had sold on the open market. The main difference is val­u­a­tion: you need a credible market-value figure on the day of transfer.

How HMRC calculates the gain on a gift

HMRC’s formula is straightforward:

• Market value at time of gift – (purchase price + buying costs + allowable improvements)
• = Chargeable gain

Your annual CGT allowance (£6,000 for 2023/24, falling to £3,000 in 2024/25) can then knock some off the top. For second homes and buy-to-lets, the remaining amount is taxed at 18% (basic-rate band) or 28% (higher-rate band) depending on where the gain sits against your other income.

If you’re gifting a share in a property, only your share of the gain is assessed. That’s handy for couples who can split ownership to use two CGT allowances—but the arithmetic still matters.

Special rules when gifting property to children or other family members

Whether you’re gifting property to children CGT free depends on two things:

1. Your relationship with the recipient
2. Whether you lived in the property as your main residence (and for how long)

Gifts between spouses or civil partners are exempt from CGT. For everyone else—adult children, parents, siblings, nieces, nephews or a family trust—normal CGT rules apply. HMRC does not offer a “family exemption” for direct gifts outside your marriage or civil partnership.

Main Residence Relief vs gifting: what still applies?

Private Residence Relief (PRR) protects the gain that accrues while a property is your only or main home. But it covers you, the owner—not the recipient. If you’re giving away the house you currently live in (or have previously lived in), some or all of the gain may still be relieved.

Key points to remember:

• If you occupied the property as your main home for the entire ownership period, PRR can wipe out CGT completely, even on a gift.
• If you let it out or left it empty at any stage, part of the gain could be taxable. You may also qualify for Lettings Relief on the period it was rented, but only up to £40,000 and only if you shared occupation with the tenant.
• The final 9 months of ownership usually get PRR automatically, even if you’ve moved out.

A common confusion arises when parents give the family home to an adult child yet continue to live there rent-free. That triggers gift with reservation of benefit rules for Inheritance Tax, and PRR for CGT can become messy. Specialist advice is essential.

Worked example: gifting a buy-to-let flat to your adult child

Let’s put numbers on the theory. Imagine you bought a London flat in 2012 for £250,000 plus £5,000 costs. You spent £20,000 on a loft conversion that HMRC accepts as an enhancement, pushing your base cost to £275,000.

Market value today: £475,000.

Chargeable gain: £475,000 – £275,000 = £200,000.

Annual exemption 2023/24: £6,000.

Taxable gain: £194,000.

You earn £60,000 a year, so the entire gain falls in the higher-rate CGT bracket. Tax due: 28% of £194,000 = £54,320.

You must file a UK Property CGT return within 60 days of gifting the flat. Payment is due at the same time.

If you jointly owned the flat with your spouse—each holding 50%—the figures would halve, and both of you could use a £6,000 allowance. That’s why many couples shift ownership before gifting, to soften the hit.

Reducing or deferring CGT on gifted property

The bill above looks steep, but you may have options:

1. Use spousal transfer first

Transfer all or part of the property to your spouse or civil partner first (no CGT), then jointly gift to the child. Two CGT allowances, potentially lower rate bands and a 50% discount on each partner’s share can save thousands.

2. Time the gift carefully

If you’re close to retirement or anticipating a lower-income year (e.g. unpaid leave, career break), gifting while your overall income is reduced could push some gain into the 18% band.

3. Claim any qualifying reliefs

Improvement costs, buying/selling fees, and periods of occupancy all chip away at the taxable gain. Meticulous record-keeping pays.

4. Spread the gift

Giving away 10% share each tax year (if practical) lets you use multiple annual exemptions and keep gains below higher-rate thresholds. Land Registry and legal fees may outweigh the benefit on small gifts, so crunch the numbers.

5. Consider hold-over relief in a trust

Placing the property into a relevant property trust for the child can defer CGT via hold-over relief, but this moves the tax headache to the trustees (and potentially triggers immediate Inheritance Tax at 20% over nil-rate band). It’s not a DIY route.

Reporting and paying CGT within 60 days: no extensions!

Since 2020, UK residents who dispose of a residential property with tax to pay must file a return and pay within 60 days. Missing the deadline means automatic late-filing and late-payment penalties, plus interest.

Documentation you’ll need:

• Completion (transfer) date and a copy of the signed TR1 or equivalent
• Market value evidence—surveyor’s report or estate-agent letters
• Completion statement from original purchase
• Invoices for legal fees, SDLT, major improvements
• Your personal Government Gateway credentials

Busy professionals struggle to gather all this within two months, especially when solicitors and agents move on. That’s where an online, fixed-fee filing service can rescue the schedule.

SwiftCGT: a faster way to file your 60-day return

SwiftCGT is an online, HMRC-registered service dedicated to UK residential-property CGT. For a transparent fee—£299 for a sole owner, or £449 for joint owners (that’s a 50% discount on the second return)—chartered accountants prepare and submit your return within three working days.

How it works:

1. Complete a short questionnaire and upload your documents securely.
2. A qualified accountant reviews, calculates your CGT, and flags any missing reliefs.
3. You receive a draft for approval; sign digitally and relax.
4. SwiftCGT submits to HMRC and provides payment instructions, so you never miss the 60-day window.

No hourly rates, no hidden extras—just rapid compliance so you can focus on the life event behind the gift, not the paperwork.

Key takeaways & next steps

• Gifting property to children CGT is real: HMRC taxes the gain as though you sold at market value.
• Only gifts between spouses/civil partners are CGT-free.
• PRR can still protect gains if the property was your main home, but rental periods dilute the relief.
• You have 60 days from completion to file and pay.
• Planning—splitting ownership, timing gifts, using reliefs—can cut the tax substantially.
• SwiftCGT files your return in three days for a fixed fee, keeping you on the safe side of HMRC.

Ready to gift without nasty surprises? Gather your figures, check your reliefs and, if time is short, let SwiftCGT handle the admin so your family can enjoy the real gift: peace of mind.

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