Gifting property has a stigma. One of tax evasion and slipping through loopholes, with which few of us want to be identified. Despite the fact that (as long as you follow the rules), giving property to children is entirely legal and ethical. It’s really pretty clever.It’s a simple approach to sell your home.
Unlike a standard open market sale, you’ll also be able to avoid the hassle of finding a dependable buyer, saving you money on marketing, agency fees, embarrassing offer discussions, and so on. In reality, by selling your home to your kid for £1, you may negotiate your own price, which might be useful, especially if the property in issue is relatively unique or a ‘problem property,’ i.e. something you’d struggle to sell on the open market. If you are objective to release equity from your home, you could sell the property and give the proceeds to your son to buy his own home. First property buyers such as Property Rescue specialize in buying properties quickly.
Is it lawful for me to sell my home to a family member?
Selling your home to a kid or family member for less than market value may be viewed as sneaky or unethical. In reality, it is quite legal. There is no rule in the UK that forbids you from selling your price at whatever price you wish.
Since the beginning of the epidemic, housing prices have climbed, as have mortgage minimum deposits, placing an increasing pressure on first-time purchasers. It’s understandable that existing homeowners want to help their offspring gain a foot on the property ladder. While it is permissible to sell your home to a family member, you must consider the accompanying charges such as capital gains, prospective inheritance tax, and stamp duty. Each of them is discussed in further depth in the next section.
Selling your flat to your children for the price you paid for it does not reduce any potential capital gains tax (CGT) bill because the gain (or loss) you make on disposal of the flat is taken to be the difference between its market value and the price you paid for it, even if you sell for less than that market value. The difference between the amount your children pay and the genuine worth also qualifies as a gift for inheritance tax reasons. If you are still living seven years after making the gift, it is exempt from inheritance tax.
If your children are first-time buyers, they should seriously consider not purchasing your flat from you. They would not be eligible for the stamp duty land tax (SDLT) exemption for first-time purchasers who purchase a house worth up to £500,000 (the first £300,000 is zero-rated, and the remaining up to £500,000 is taxed at 5%).
If your children already own their own properties, they will have to pay the higher rate of SDLT – the regular rate plus three percentage points – on the purchase of your property in addition to not qualifying for first-time buyer relief.
What are the expenses associated with selling a home to my child?
There is no getting around the reality that selling your property to your son for a shilling would significantly reduce the cost of your transaction. But it doesn’t mean it will completely eliminate them. In truth, donating property is not inexpensive, therefore anybody interested in doing so would most likely require a substantial sum of money. A possible speed bump straight away, particularly if you’re doing so to remove equity – which is why it’s first on our list. So, to be sure that gifting property is the appropriate plan for you, here are some of the charges you might anticipate when selling your home to a family member for an exceptionally high price…
Capital Gains Tax (CGT) – If the property you want to donate was purchased 10 years or more ago, you will almost certainly have to pay Capital Gains Tax. To summarize, if the value of a property has greatly grown when you come to sell it, CGT is required. The amount is certainly unique to your case, but CGT expenses have been known to vary from a few hundred pounds to tens of thousands of pounds. So, before you even consider hiring a solicitor, figure out how much this will cost you.
