How to Transfer Ownership of a House to a Family Member (UK)

Helping a family member is one of the most rewarding things you can do.

Transferring property ownership is one of the best ways to do this.

There are several ways to this, each with its own tax implications.

In this blog, we have examined each type and the tax involved.

How do you transfer a property to a family member?

If the property transfer is a gift, the owner must transfer via a Deed of Gift, otherwise known as a Transfer of Gift.

After the legalities are finalised, the chosen family member will be named as the new owner on the land registry.

A TR1 form must be completed to transfer the entire ownership and a TP1 form for a partial transfer. An AP1 form notifies the land registry of changes in property details.

Using a conveyancer is the most accessible option, but many people choose to undertake the process themselves because of the fees involved.

When this happens, an ID1 form must be completed to confirm the current owner’s identity.

Processing fees are involved, but it will still be more affordable than using a conveyancer.

The forms and the fee should be sent to the land registry upon completion.

If you have an outstanding mortgage on the property, you will need your lender’s permission before they can start the process.

Transferring property to your spouse/civil partner

One of the most common times when property owners wish to transfer ownership occurs after marriage. Adding your spouse to the title deeds requires a transfer of equity.

The owner stays on the title deeds, but a share of equity is transferred to another party or multiple parties.

This process involves legal requirements, so a solicitor must transfer equity and complete the land registry forms and fees.

If you have a mortgage, the lender will need to be consulted. Because of affordability and credit checks, they must approve the additional person to ensure the mortgage will still be repaid monthly.

Remember that stamp duty may apply when adding a party to the equity. If the new party’s mortgage or equity is over £125,000, they must pay tax on any equity over this amount.

Transferring property to your children

Many homeowners want to know how to transfer house ownership to their children.

This can help get them onto the property ladder or avoid paying inheritance tax while maintaining the property as a primary residence.

A transfer of equity can be a good option in these circumstances. It works in the same way as transferring a house to your spouse.

Otherwise, gifting property is the most common option here. This is best if you do not want your children to pay inheritance tax when you die and will apply to a property worth over £325,000, starting at 40%.

If the person gifting the property lives on for seven years and beyond, then inheritance tax is unlikely to apply.

This is as long as the person gifting does not benefit from the transfer as though they were a primary householder.

Transferring property to a joint tenant

If you own a property with someone else, signing your house over to someone else is possible.

Joint tenants or tenants in common share the same rights to the property, and the property in question will be transferred to the other party/owner if one dies.

Tenants in common is when two or more parties own different amounts of equity in the property.

It does not automatically transfer to the other upon one party’s death, but it is possible to pass on a share of the property in a will.

In most cases, this is used when adding a child to the title deeds but not having them as a joint tenant.

How long does it take to transfer ownership of a property?

The process of transferring property ownership takes four to six weeks from start to finish.

This depends on several factors, but the speed of your conveyancer will have a big say.

Most delays are caused by third parties, such as those waiting for paperwork and mortgage lenders.

Is it a good idea to transfer house ownership to a family member?

Inheritance tax in the UK must be paid once the property has been bequeathed in a will.

However, this is only if the property is worth more than a specific value. Whether transferred to a child or a grandchild, this value must be more excellent.

If the ownership transfer is made more than seven years before the parent or grandparent’s death, inheritance tax is not usually payable.

If the transferring party dies between 3 and 7 years after gifting, the children must pay property tax, not the complete 40%. This decreases year on year and is known as tapered relief.

After you have gifted the property, you cannot live there rent-free. If you do, your property will not be exempt from Inheritance Tax.

Instead, you must pay rent in line with the average rate in the area.

This is why many people consider making the transfer before their later years.

The recipient should not give the other party anything in return to avoid inheritance tax.

The new owners may charge the previous owner rent, but this needs to be at market rent and not lower, or it will be considered a chargeable consideration.

Requirements for giving property as a gift to a family member

A Deed of Gift has several requirements for it to be done correctly.

One requirement is that confirmation that the current owner is of sound mind and is acting of their own free will must be provided.

Also, any payments and debts associated with the property must be settled before transferring.

There is also Capital Gains Tax to consider. This is calculated as the difference between the property’s value when it was first purchased and at the transfer time.