Parents can sell their properties to their children for £1, but there are “important” implications to be aware of, an expert has said.
According to new research by home buying service, We Buy Any Home, Google searches for “Can I sell my house to my son for £1” surged a huge 5,000 percent in the past 30 days in the UK.
While this is “technically” possible, Terry Fisher, property expert at We Buy Any Home, said it involves much more than just exchanging the property for a nominal sum. A number of other factors, such as potential inheritance tax and capital gains tax liabilities, should considered too.
He explained: “Technically you wouldn’t be selling it to your child, rather you’d be gifting the property to them. In this case, the £1 asking price is a symbol, known as a consideration.
“The change in ownership would qualify as a ‘gift’, so while it is technically possible to sell a house to your child for just £1, it’s important to understand the implications.
“The process of ownership transfer can be complicated, time-consuming and expensive. A house is a significant asset with legal and financial implications for both parties involved. When one is given as a gift, it is vital to ensure that the transfer of ownership is done legally and through the correct channels.”
Ensure the transfer of ownership is legally recognised
People should always work with a solicitor to lawfully transfer the deeds in the same way they would when selling a house to a new owner.
Mr Fisher said: “It’s essential to be clear on any tax implications for you and the recipient. If you’re giving a house as a gift to avoid inheritance tax in the future, be aware that the recipient may still be required to pay this tax if you pass away within seven years.
“As the previous property owner, you may still be liable to pay capital gains tax when gifting a house. This may be the case if the property’s value has increased since you first acquired it.”
Consider Stamp Duty
People also need to consider Stamp Duty Land Tax if they plan to give a house as a gift to somebody who has owned property before.
Mr Fisher said: “They may be required to pay Stamp Duty if they take over an outstanding mortgage on the gifted house.”
Consider the financial impact on yourself
Before giving a house as a gift, people should also consider the effect it might have on their financial security and estate planning. Mr Fisher said: “If you are gifting a house that you currently rent out to tenants, consider how this will impact your ongoing income.”
Make sure the recipient can afford to own the house
Consider if the person being gifted the house can afford the property ownership. Mr Fisher said: “Think about the regular bills, maintenance, and upkeep costs before you decide if it’s the right gift for them.”
Consider future financial repercussions
While the initial sale price might be small, there could be future financial repercussions.
Mr Fisher said: “Transferring ownership of a property to a child for a token amount could affect their eligibility for mortgages or loans in the future. Lenders may question the validity of such transactions and may require additional documentation or assurance.”
