Giving somebody a house as a gift is a very generous gesture…
It is typically done for spouses or children.
Still, as a homeowner, you can gift your property to anybody you like.
However, it’s essential to first understand the legal and financial implications involved in such a gift.
In this blog, we’ll dive deeper into the reasons for giving a house as a gift, its pros and cons, and other information around the process.
Can you give a house as a gift?
Yes, you can give a house as a gift.
However, a house is a significant asset with legal and financial implications for both parties involved.
When one is given as a gift, it’s vital to ensure that the transfer of ownership is done legally and through the correct channels.
Reasons for giving a house as a gift
People give houses as a gift for many reasons. While some motivations are more common than others, you can decide to provide a house to someone for any reason. In most cases, it’s one of the following:
1. To provide security
Some property owners might give a house to a relative or friend to help them get on the property ladder. The ultimate motivation here is to provide them with more financial and/or physical security.
2. As a reward for achievements
Giving property as a gift can be a way to reward someone. Often, it’s for a significant achievement such as completing a university education, getting married, or having their first child.
3. To plan your estate
Giving property as a gift can transfer your wealth to the next generation while avoiding inheritance tax.
4. To avoid capital gains tax
You might avoid paying capital gains tax on the sale of the property by giving the house to a relative or friend as a gift rather than selling it.
Pros and cons of giving a house as a gift
Pros
Giving a house as a gift enables someone to help somebody else in a significant way, i.e., it can be a generous and meaningful gesture.
Furthermore, the recipient can avoid paying the costs associated with traditionally buying a house.
Giving a house as a gift can also be an ideal way to transfer wealth to children or others without paying taxes on the property sale.
Cons
The process of ownership transfer can be complicated, time-consuming, and expensive. There may also be legal fees to pay, for example.
As with selling a house, there is a cost to engaging property professionals in the process.
In addition, the person gifting the house is obviously giving up an asset, which might impact their own financial stability. The recipient may also be responsible for paying taxes and maintenance costs.
Things to keep in mind when giving a house as a gift
There are several important factors to remember before transfer the ownership of a property to a family member or friend.
Ensure the transfer of ownership is legally recognised
You should always work with a solicitor to lawfully transfer the deeds in the same way you would when selling the house to a new owner.
Consult a tax professional
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
You’ll need to consider Stamp Duty Landy Tax if you plan to give a house as a gift to somebody who has owned property before.
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, consider the effect it might have on your financial security and estate planning.
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 you’re giving the house can afford the property ownership. Think about the regular bills, maintenance, and upkeep costs before you decide if it’s the right gift for them.
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