Gifting Property Under UK Law

Someone may gift property for several reasons, although the most common are usually as follows:

• Helping a family member onto the property ladder 
• Simplifying the probate process by planning an estate 
• Reducing inheritance tax

However, gifting property under UK law isn’t as easy as it seems; there are a number of legal, tax, and conveyancing requirements that you must adhere to, each of which poses its own set of requirements and challenges. If not done properly, you may find yourself involved in a complex legal or tax situation. 

In this guide, we outline and detail the full process of legally gifting a property to someone, including tax implications and considerations to take before starting this process. 
If you are looking for personalised expert guidance and advice for gifting a property, contact either our expert Conveyancing, Will Writing, or Trust Solicitors today.

Can You Gift Property Under UK Law?

Yes, under UK law, you can gift a property to someone else. However, as mentioned above, there are certain legal, tax, and conveyancing requirements you will have to meet: 

• You must legally own the property
• You must be the registered legal owner as listed in the Land Registry.
• If the property being gifted has an outstanding mortgage, you will usually need the lender’s permission in order to gift it. 

You can either transfer 100% of the property ownership, or part ownership of the property (a share of the property).

Legal Documents

To gift a property, the appropriate legal forms must be filled out and submitted as part of the process. 

These documents are either a ‘TR1 Form’ (otherwise known as a ‘Transfer of Whole Registered Title’) or a ‘Deed of Gift’. More information can be found on each below.

Deed of Gift

A Deed of Gift is a legal document that allows you to transfer ownership of a property or other assets to another person, with no financial transactions involved. Essentially, it’s used as a formal gift. 

It includes: 

• Full details of the property
• Who is gifting the property, and who would be receiving it
• A full statement showing that this is a gift with no conditions involved

TR1 Form

A TR1 form, otherwise known as a ‘Transfer of Whole Registered Title’, is an official land registry document that allows a person to transfer the ownership of a property to another, under UK law. Without this form, the Land Registry will not recognise the transfer of property. 

This form is used when the transfer includes a sale, but can also be used if the property is a gift to someone. 

It includes: 

• Who is transferring the property
• Who is receiving the property
• What the property is
• On what terms the property shall be received (for money, as a gift, etc) 

Common Scenarios

There are several situations as to when and why a property is gifted. The most common include: 

Gifting to a Family Member: This is often done to help a family member get onto the property ladder (for example, parents gifting property to their children).

Gifting to Your Spouse or Civil Partner: Properties are often gifted to spouses or civil partners. This is common when it comes to planning your estate or ensuring joint property ownership. 

Divorce or Separation: As part of a divorce or separation process with your spouse, property may be gifted as part of a financial settlement. 

Reducing Inheritance Tax Liability: Property is often gifted to reduce Inheritance Tax liability. It is important to remember, however, that the seven-year rule does apply for gifting property. This is where tax may still be payable if the property’s original owner passes away within seven years of making the gift.

Gifting Property in a Trust: Properties can be gifted within a trust; this is often done to protect that asset for estate planning. Setting up trusts can have tax and legal implications, so it is important to consult with an experienced Trust Solicitor. 

Tax Implications

As well as legal documents, when gifting a property to someone, you need to remember the tax implications that come with the transfer. 

The three main UK taxes you need to be aware of are: 

• Stamp Duty Land Tax (SDLT)
• Capital Gains Tax (CGT)
• Inheritance Tax (IHT)

Our solicitors can help simplify this process by ensuring that you use the correct document, helping you prepare and submit these legal documents accordingly.

Stamp Duty Land Tax

You do not have to pay Stamp Duty Tax when gifting property, as long as there is no mortgage still outstanding on the property. 

However, if the recipient of the property takes on a mortgage (of more than £125,000) as part of this gift, then Stamp Duty Tax will be due, even if there is no cash transaction. This is slightly different when it comes to gifting to a business, under which SDLT is almost always payable. 

The reason for this charge is because HMRC sees the mortgage balance that is taken on by the recipient as a form of payment. 

Capital Gains Tax

Capital Gains Tax is usually paid on a gifted property if the value of the property has increased since it was first purchased. 

Even though there is no financial transaction with a gifted property, HMRC sees this gift as if you had sold the property for the current market value. 

You won’t pay CGT if: 

• It is your current home, and you have lived there the entire time
• You gift the property to your spouse
• The property to be gifted is put into a trust, for example, as a benefit for your child. When this happens, CGT is delayed until the child sells the property.

The Full Step-by-Step Process

Once you have decided that you will be gifting a property, it helps to understand what the full process will look like. The following step-by-step guide details what you need to do to transfer ownership of the property to your chosen recipient: 

1. Decide the recipient

You first need to decide who you will be gifting the property to; this can be a member of your family, a friend, a charity, or even a company. 

2. Check for any mortgage or other potential restrictions

If the property you are gifting has a current mortgage, you will need consent from the lender. This is because the recipient of the property may need to take on this mortgage, or arrange a new one. 

3. Arrange a valuation

Even though you will be gifting the property, for tax purposes, HMRC will treat this as if the property is being sold at market value. Getting a professional valuation is crucial for calculating potential taxes. 

4. Consider potential taxes

As detailed above, consider any potential taxes that may impact your gifted property transfer. 

5. Instruct the help of a solicitor

A professional solicitor will help you with this legal transfer, checking for any restrictions, preparing the TR1 Form, as well as registering the new owner with HM Land Registry. 

6. Completing the transfer

Once the above has been completed, both parties will sign the correct documents, completing the property transfer, officially changing ownership.

Contact Eric Robinson Solicitors

When it comes to gifting property under UK law, this is a great way to support a family member or plan your estate. However, due to the tax and conveyancing implications, it is crucial that you completely understand the requirements needed to ensure a smooth transfer.

If you are thinking about gifting your property to a loved one, or are in the process of planning your estate, contact either our expert Conveyancing, Will Writing, or Trust Solicitors today at one of the following locations. Our team is here to guide you through every step based on your personal circumstances:

• Southampton
• Hedge End
• Chandlers Ford
• Winchester
• Lymington 
• Richmond Upon Thames

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