Transferring Property to Children: SDLT Guide
A complete guide to stamp duty, inheritance tax, capital gains tax, and practical alternatives when transferring property to your children.
Key Takeaways
- SDLT applies only on chargeable consideration - if you gift a mortgage-free property, SDLT is nil.
- Any outstanding mortgage assumed by the child counts as chargeable consideration for SDLT.
- The 5% additional dwelling surcharge applies if the child already owns residential property.
- Capital gains tax is assessed on market value for the parent, not the actual price received.
- The gifted portion is a potentially exempt transfer for IHT - the parent must survive 7 years.
- Leaving the property via a will avoids CGT (rebasing at death) but the child only receives it on death.
In this article
Property Transfers to Children: Overview
Transferring property to a child is one of the most common family property transactions in the UK. Whether you want to help your child onto the property ladder, reduce the size of your taxable estate, or simply pass on a cherished family home, there are multiple ways to structure the transfer - each with different tax consequences.
The three main taxes to consider are stamp duty land tax (SDLT), capital gains tax (CGT), and inheritance tax (IHT). They interact with each other in important ways, and the decision to transfer property to a child should only be made after understanding all three.
Use our stamp duty calculator to estimate SDLT on your specific transaction. This page covers all the key SDLT rules plus the CGT and IHT context you need.
Related guides: gifted equity stamp duty, helping children buy property, and our transfer of equity complete guide.
SDLT Rules for Parent-to-Child Transfers
The fundamental SDLT rule is simple: SDLT is charged on chargeable consideration. For a parent transferring property to a child, the consideration is whatever the child provides in return:
- Cash paid by the child
- The outstanding mortgage balance assumed by the child
- Any other debts or liabilities assumed
If the child provides nothing in return (a pure gift with no mortgage), SDLT is nil. If the child pays £200,000 cash for a £400,000 property, SDLT is on £200,000.
Importantly, unlike CGT, SDLT does not use market value as the basis for individual-to-individual connected party transactions. A parent can legally sell a £500,000 property to their child for £1 and SDLT would be £0, provided there is no mortgage to assume.
Full Gift: No Consideration
A full outright gift of property to a child - where no money changes hands and there is no outstanding mortgage - results in SDLT of nil. There is no chargeable consideration, so no SDLT arises.
However, an SDLT return must still be filed with HMRC within 14 days of completion if the property's market value exceeds £40,000, even though no tax is due. The return records the nil consideration and claims the transaction is not subject to SDLT.
When Full Gift Works Best
- Property is mortgage-free
- Parent's main residence (PPR exemption eliminates CGT)
- Parent is in good health and likely to survive 7 years
- Child does not currently own another property (avoids ADS)
Partial Sale Below Market Value
Many parents prefer to sell below market value rather than gift entirely. This reduces the gifted element (potentially reducing IHT exposure) while still providing the child with a below-market acquisition. SDLT is calculated only on the actual cash consideration paid plus any mortgage assumed.
A partial sale at 50% of market value halves the SDLT consideration. If the child pays £200,000 for a £400,000 property with no mortgage, SDLT is on £200,000.
| Sale Price (£400k property) | SDLT | Gifted Element (IHT PET) |
|---|---|---|
| £400,000 (full price) | £10,000 | £0 |
| £300,000 (25% discount) | £5,000 | £100,000 |
| £200,000 (50% discount) | £1,500 | £200,000 |
| £0 (full gift) | £0 | £400,000 |
Note: These SDLT figures assume no mortgage. Add mortgage assumption to the cash price for total consideration. CGT applies to the parent in all cases at market value.
Mortgage Considerations
The presence of an outstanding mortgage significantly affects the SDLT position when transferring property to a child. If the child takes over the existing mortgage (or takes a new mortgage to fund the purchase), the mortgage amount counts as chargeable consideration.
Mortgage Assumption Always Counts
Even if you gift the property "for free", if there is an outstanding mortgage and the child assumes it, SDLT is due on the mortgage balance. For example, gifting a property with a £200,000 mortgage: SDLT consideration = £200,000, which at standard rates = £1,500. To achieve truly nil SDLT, the mortgage must be repaid before transfer.
Lenders will need to consent to any change of mortgage borrower. If the child is taking over the existing mortgage, they must qualify under the lender's affordability criteria. Many parents find it necessary to repay the mortgage first using savings or equity release, then transfer the mortgage-free property to their child.
Additional Dwelling Surcharge
The 5% additional dwelling surcharge (ADS) can apply when property is transferred to a child if that child already owns a residential property. This applies even in pure gift situations - the child does not need to pay anything for the surcharge to be triggered by their existing ownership status.
Surcharge Applies Even on Gifts
If your child owns another property (including their own home) and you gift them a £300,000 property with a £150,000 mortgage, the SDLT is on £150,000 at 5% surcharge rates. The surcharge is not optional - it applies based on the child's ownership position regardless of their family relationship with the transferor.
The child's SDLT liability would be: £125,000 × 5% = £6,250 + £25,000 × 7% = £1,750 = £8,000 total. Without the surcharge, it would be £500. The additional cost is £7,500.
If the transferred property will be the child's main residence and they are selling their existing home, replacement main residence relief may eliminate the surcharge - but the sale must happen at the right time.
Inheritance Tax: The 7-Year Rule
When you gift property (or sell it at below market value) to your child, the gifted portion is a potentially exempt transfer (PET) for inheritance tax purposes. The 7-year rule works as follows:
| Years Survived After Gift | IHT Position | Taper Relief |
|---|---|---|
| Less than 3 years | Full IHT at 40% | None |
| 3 to 4 years | 80% of full IHT | 20% reduction |
| 4 to 5 years | 60% of full IHT | 40% reduction |
| 5 to 6 years | 40% of full IHT | 60% reduction |
| 6 to 7 years | 20% of full IHT | 80% reduction |
| 7+ years | No IHT | Fully exempt |
Gift with Reservation of Benefit
If you continue to live in the property after gifting it to your child, HMRC treats this as a "gift with reservation of benefit" and the property remains in your estate for IHT purposes regardless of the 7-year rule. This is a common trap: parents who give the family home to a child but continue living there receive no IHT benefit.
Capital Gains Tax for the Parent
Transferring property to a child is a disposal for CGT purposes. Crucially, the disposal is treated as taking place at market value, not the actual price received. This means even a pure gift triggers a CGT calculation based on what the property is worth.
The parent's CGT liability is: (Market value at transfer) - (Original purchase price + improvement costs) = Capital gain. CGT at 18% (basic rate) or 24% (higher rate) applies to the gain, minus the annual exempt amount (£3,000 for 2024/25 onwards).
Principal Private Residence Relief (PPR)
If the property has been the parent's main home for their entire period of ownership, PPR relief fully exempts the capital gain. No CGT is due. This is the most common scenario: parents transferring the family home to a child. If the property was ever rented out or used as a second home, partial CGT applies.
CGT on residential property must be reported and paid to HMRC within 60 days of completion using the UK Property Account on the HMRC website. This applies even if the parent believes PPR relief exempts the entire gain.
Worked Examples
Example 1: Gift of Family Home (PPR, no mortgage)
- Property value: £450,000
- Outstanding mortgage: £0
- Parent has lived there throughout: Yes (PPR)
- Child status: First-time buyer, no other properties
SDLT
£0
No consideration
CGT (Parent)
£0
PPR exemption
IHT risk
7-year PET
£450k value
Example 2: Transfer of BTL Property to Child Who Owns Home
- Property value: £280,000 (buy-to-let)
- Outstanding mortgage: £120,000
- Parent transfers for nil cash consideration
- Child owns their own home
- Original purchase price by parent: £150,000 in 2008
SDLT consideration
£120,000 (mortgage assumed)
SDLT: £6,000
ADS 5% applies (child owns property)
CGT (Parent)
£280k - £150k = £130k gain
~£31,200 CGT
At 24% (higher rate)
IHT risk
PET £280k
7-year rule applies
Practical Alternatives
An outright transfer is not always the best approach. Consider these alternatives:
Leaving in Your Will
Property passing via a will on death benefits from CGT rebasing - no CGT on lifetime gains. IHT may still apply if the estate exceeds the nil-rate band (£325,000 per person, with up to £175,000 residence nil-rate band for family homes passed to direct descendants).
Best for: Older parents, properties with large embedded gains, IHT planning purposes.
Joint Ownership
Add the child to the title deeds as a part-owner (tenants in common). SDLT only applies to the consideration for the child's share. The parent retains a share, and on death their share passes under their will or by survivorship. This is a partial transfer with less IHT and CGT exposure than a full gift.
Best for: Properties being purchased by parents for children to live in, or investment properties with management split.
Discretionary Trust
Transfer the property to a discretionary trust where the child is a beneficiary. The parent (settlor) no longer owns the property personally. There are IHT advantages on exit from the estate (though immediate IHT charges may apply on transfer into trust above the nil-rate band). SDLT and CGT both apply on transfer into the trust.
Best for: Complex estates with multiple children, asset protection purposes.
Gifted Equity Mortgage Purchase
The child purchases the property using a mortgage, with the parent gifting the difference between the sale price and market value. SDLT is lower (on the discounted price). The child has their own mortgage and ownership from day one.
Best for: Children who can service a mortgage; properties being actively transferred to a new generation now.
Pros and Cons Summary
| Option | SDLT | CGT | IHT |
|---|---|---|---|
| Full gift now (PPR property) | £0 | £0 (PPR) | 7-year PET |
| Below-market sale | On actual price | On market value | PET on discount |
| Leave via will | £0 on death | £0 (rebased) | In estate (may use NRB) |
| Joint ownership | On child's share | On parent's share at market value | Parent's share in estate |
| Discretionary trust | On transfer in | On transfer in | Complex - periodic charges |
NRB = Nil-rate band (£325,000 + up to £175,000 residence nil-rate band). Always seek professional advice before committing to a strategy.
Calculate Your Stamp Duty
Use our calculator to work out the exact stamp duty for your property purchase.
Your Results
Stamp Duty to Pay
£5,000
Effective tax rate: 1.67%
Tax Breakdown
| Band | Rate | Tax |
|---|---|---|
| £0 - £125,000 | 0% | £0 |
| £125,001 - £250,000 | 2% | £2,500 |
| £250,001 - £300,000 | 5% | £2,500 |
| Total | £5,000 | |
£0 - £125,000
0%
£0
£125,001 - £250,000
2%
£2,500
£250,001 - £300,000
5%
£2,500
Total
£5,000
Tax by Band
Added to 25-Year Mortgage
£29/month
Based on 5% interest rate, added to loan amount
Frequently Asked Questions
Can I give my child a property I bought as an investment?
Yes. However, unlike a primary residence, a buy-to-let or investment property has no PPR relief, so CGT will apply to the full gain at market value. The child's SDLT depends on consideration paid and whether they already own property (surcharge applies if so). IHT 7-year clock starts on the gift date.
What if I transfer the property and then the child sells it?
If the child sells the property and it is their main residence, they may benefit from PPR relief on their own gain. Their gain is calculated from the market value at the time of transfer (not the original price paid by the parent). Any discount element from a below-market purchase is absorbed into the child's base cost at the market value.
Does transferring affect the child's first-time buyer status?
Yes. Once a child owns a property (even as a gift), they are no longer a first-time buyer for SDLT purposes. Any future purchase will not qualify for first-time buyer relief. If your child is planning to buy their first home soon and you are also considering gifting them a property, carefully consider the sequencing.
Can I transfer a property to a minor child?
Minors under 18 cannot legally hold freehold property in England and Wales. The property would need to be held by trustees (often the parents) on bare trust for the child until they turn 18. The SDLT treatment would depend on the trust structure, and a solicitor should advise on the appropriate trust deed.
Do I need a solicitor to transfer property to my child?
Yes, in practice. A solicitor handles the transfer deed (TR1), SDLT return, Land Registry application, and lender consents if there is a mortgage. CGT advice may also be needed from a tax advisor. Attempting this without professional help risks errors that could be costly to resolve.
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Emma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Stamp Duty Calculator to help buyers understand the complex world of property transaction taxes.