Thinking of transferring a property to your spouse or children?
It can be a smart planning move, but gifting property isn’t always as simple as it sounds.
Here’s what you need to know about Capital Gains Tax, Stamp Duty, Income Tax, and Inheritance Tax before you act.
Why Transfer a Property?
Common reasons include:
- Sharing rental income with a lower-earning spouse
- Passing assets to your children
- Planning for inheritance tax
But transfers can trigger unexpected tax bills if you’re not careful.
🎥 Prefer to watch?
This video breaks down the key tax rules when transferring a property to a Spouse or Child, including CGT, SDLT, and rental income changes.
Capital Gains Tax (CGT)
HMRC treats a gift as if you sold the property at market value, even if no money changes hands.
Example:
- Bought for: £100,000
- Current value: £250,000
- Gain: £150,000
→ You may need to pay CGT now.
✅ Exception:
Transfers between spouses or civil partners are tax-neutral (no gain, no loss).
🚫 Gifts to children trigger CGT immediately — no exemption, even if they’re under 18.
Want to understand how Capital Gains Tax is reported and calculated in practice? This guide explains what HMRC expects and the steps involved: How to Report Capital Gains Tax When You Sell a Rental Property (UK Guide 2025)
Stamp Duty Land Tax (SDLT)
SDLT applies if there’s a mortgage involved, even when the transfer is a gift.
Example:
- Property has a mortgage of £150,000
- You transfer 50% to your spouse
- Their share of debt: £75,000
→ SDLT is calculated on £75,000
✅ No mortgage? No SDLT is usually due.
It’s also important to understand how different costs and transactions are treated for tax purposes, particularly when dealing with property. This guide explains what can and can’t be taken into account: What Expenses Can You Claim When Selling a Rental Property?
Income Tax After Transfer
Once transferred:
- The new owner must declare and pay tax on their share of rental income.
- For spouses, the default is 50/50 split, unless you file Form 17 and provide evidence of unequal ownership (Deed of Declaration).
Inheritance Tax (IHT)
Gifting to children may reduce your Estate’s IHT exposure if you survive 7 years after the gift.
BUT: CGT still applies at the time of transfer, so you need to plan both taxes together.
Common Pitfalls to Avoid
⚠️ Assuming gifts are tax-free
⚠️ Forgetting SDLT on mortgage transfers
⚠️ Not updating Land Registry records
⚠️ Failing to declare rental income properly
Many issues arise from assumptions about how HMRC treats gifts and transfers. This explains why taking a “common sense” approach can sometimes lead to unexpected tax consequences: Why You Shouldn’t Make Assumptions with HMRC
What to Do Before Transferring
- ✅ Get a professional valuation
- ✅ Review mortgage terms with your lender
- ✅ Estimate your CGT and SDLT
- ✅ Update legal ownership (Land Registry)
- ✅ File Form 17 and Deed of Declaration (if applicable)
Further reading:
- How to Report Capital Gains Tax When You Sell a Rental Property (UK Guide 2025)
- What Expenses Can You Claim When Selling a Rental Property?
- Why You Shouldn’t Make Assumptions with HMRC
Need professional support?
If you’re considering transferring a property and want to understand the full tax impact — including Capital Gains Tax, Stamp Duty, and future income implications — you can book a Paid Tax & Property Diagnostic Call.
On the call, we will:
- Understand your situation at a high level
- Identify any immediate tax exposures
- Outline the correct approach and next steps