Can I Sell My House to My Children?
Estimated reading time 6 minutes
Getting on the property ladder these days is tough. From hard-to-achieve deposits to mortgage rejection, it seems many people can’t catch a break. That’s why many look to the bank of Mum and Dad for a little help. Sometimes, though, funds are just as scarce there, so an alternative route must be found. That route often comes from selling the house to the children.
Of course, this may sound a little unusual, but it is certainly possible to sell your house to your children, allowing them to step onto the property ladder and start their journey to complete independence.
Am I legally allowed to sell my house to my children?
There is nothing wrong with selling your house to your children. You have just as much right to sell to them as you are to anyone else. You’ll just have to bear in mind the various tax implications that may arise.
These could prove costly and might mean a sale isn’t the best option. However, we’ll cover the potential tax costs a little further down the page so you can weigh up the best option.
How much could I sell my house to my children for?
You can sell your house to your children at market value, under market value or even for £1 if you like. There are no set rules on pricing unless you have a mortgage. If you have a property with an outstanding mortgage balance, the minimum you can sell your house to your children for is that amount. So, if you have a property worth £400,000 and have £200,000 left on the mortgage, that’s the price you’ll have to sell for so that the mortgage can be paid off.
However, what you should consider regardless of how much you sell for is tax.
What are the tax implications for selling my house to my children?
With any property transaction, there are concerns over how much tax is due. Much depends on whether the property is gifted or sold. As you’ll find out below, selling your house for just £1 constitutes a gift.
Selling it at the market rate or a fraction of the market rate is a little different.
Capital Gains Tax (CGT): If, for example, you purchased the property many years ago for £150,000 but in today's market it is worth £250,000, Capital Gains Tax might apply when you sell your home to your children.
Stamp Duty (SDLT): Stamp Duty might apply where the property sold by you to your children exceeds £300,000 where they are a first-time buyer or £125,000 if they have previously owned property. If they already own another property, an additional 5% will be added to the SDLT they owe.
Inheritance Tax (IHT): If you sell your home to your children for less than it’s worth, the price difference is classed as a gift. This could see IHT avoided. However, Like SDLT, there are scenarios where IHT will need to be paid. You, the gifter, must live for at least seven years after gifting the home, for IHT to be avoided. Also, the estate must be within the threshold of £325,000 for an individual or £650,000 for a couple to stop an IHT bill from appearing.
Can I sell my house to my children for £1?
Yes, you can sell your house for as little as £1 to your children and this could help avoid the costly tax bills. However, if a mortgage remains on the property, you wouldn’t be able to sell it for just £1.
Selling a property for £1 is seen as giving it as a gift due to the small sum involved. This means that Stamp Duty Land Tax won’t apply either. If a mortgage remains on the property and the outstanding balance exceeds the SDLT threshold, there will likely be a bill to pay. Furthermore, should the property have been sold for £1 to your children but they already own another property that they live in, SDLT will be applied.
Selling your house for £1 to your children can also see Inheritance Tax avoided, which can be of huge relief due to how much it can cost. With current rates at 40%, it’s a lot of money to lose. However, due to this type of sale being classed as a gift, you must live for seven years after making the gift, have an estate worth less than £325,000 (£650,000 for couples) and pay market rate rent if you remain living there for your children to be exempt from IHT.
What’s the process for selling my house to my children?
The process is much like how you would sell it to anybody else. There will still be a host of legal issues to rectify, paperwork to complete and money issues to be resolved, so you’ll both need to hire a solicitor. Aside from that, you can say goodbye to the need for estate agents, a home stager and any marketing costs as you’ve already got your prime customer lined up.
Can I still live in the house after selling it to my children?
You can, although with them being owners, should a dispute arise in the future, they are within their power to evict you. If the home was gifted rather than sold, you can remain living there but if you do not pay the market rate for rent, your children may be liable for IHT.
Selling your house to your children is something that shouldn’t be rushed into. The potential for CGT, SDLT or IHT could risk their investment being severely hindered and mean they cannot afford to live there. Some people prefer to gift their children the cash from a house sale. With Bettermove, we make that possible. Our route to sale enables you to sell your house fast, either to us or a selected network of cash house buyers. With sales completed in as little as seven days, you can give your children the boost they need to get on the property ladder with a cash injection. Why not speak to us today to get started?
