Selling your home to family: what to know first
Selling your home to family can let you downsize while keeping the property in the family, but a sale below market value is partly a gift. That can affect inheritance tax, Capital Gains Tax, care funding and your right to keep living there, so independent valuation and separate legal advice matter.
This is general information, not financial, tax or legal advice.
Selling at market value or at an undervalue
If your family member pays full market value, the sale works much like any other. If they pay less, the difference between the market value and the price is generally treated as a gift from you. For example, selling a home worth £300,000 for £200,000 would usually count as a £100,000 gift.
Inheritance tax and the seven-year rule
A gift to an individual is usually a potentially exempt transfer. If you live for seven years after the sale, the gifted element normally falls outside your estate for inheritance tax. If you die within seven years, it may be counted, with taper relief reducing the tax on gifts made three to seven years before death.
Our guide to gifting money to family explains the seven-year rule in more detail, and equity release and inheritance tax covers how borrowing against your home can affect your estate instead.
Care funding and deprivation of assets
If you later need care, the council assesses your income and capital. If it decides you gave away value mainly to reduce what you pay for care, it can treat you as still having it. This is known as deprivation of assets. There is no fixed time limit; councils look at your reasons and timing.
Our guide to paying for care covers how care assessments work.
Capital Gains Tax and private residence relief
If the home has been your only or main home throughout your ownership, Private Residence Relief usually means no Capital Gains Tax is due when you sell it.
If it has been let out or used as a second home, some tax may be due. Because a family member is a connected person, the gain is usually based on market value, not the price paid.
Stamp Duty Land Tax for the buyer is generally based on the price they actually pay, though higher rates can apply if they already own a home.
Living in the home after selling
If you sold below market value and continue living there without paying a full market rent, HMRC may treat the gifted part as a gift with reservation of benefit. It then stays in your estate for inheritance tax, however long you live.
Without a written agreement, you may also have little security if your child's circumstances change, such as through divorce or debt.
Getting the buyer a mortgage
Some lenders accept the discount as all or part of the buyer's deposit, sometimes called gifted equity, but criteria vary.
Valuation and separate solicitors
- Get an independent valuation from a RICS-registered surveyor, so the market value and any gift element can be shown to HMRC or a council later.
- Use separate solicitors for seller and buyer, so each side gets independent advice.
- Put the terms in writing, including any agreement about you staying on.
Family dynamics
A below-value sale to one child can feel unequal to others. Some families balance this through their wills or other gifts. Discussing it openly and early can help avoid disputes.
Alternatives to selling your home to family
- Selling on the open market and gifting some of the proceeds, which keeps the gift separate and clear. See downsizing explained.
- Equity release, which lets homeowners aged 55+ release money while staying put. It reduces your estate as interest builds up.
- Keeping the home and leaving it in your will.
Because these rules interact, it is worth speaking to a solicitor and a tax adviser, and an FCA-regulated adviser if borrowing is involved, before agreeing a price.
Not sure which option fits your circumstances?
Written and reviewed by the Later Life editorial team. Last updated .
Frequently asked questions
Can I sell my house to my child for £1?
You can agree any price, but a sale far below market value is largely treated as a gift. The difference may count for inheritance tax if you die within seven years, Capital Gains Tax may be based on market value, and a council may consider it when assessing care costs. A solicitor and tax adviser can explain the effect.
Does my family member pay stamp duty on a below-value purchase?
Stamp Duty Land Tax is generally charged on the price actually paid rather than the market value when buying from a relative, though other rules can apply, such as higher rates if the buyer already owns a home. Scotland and Wales have their own taxes. A conveyancing solicitor can confirm what applies.
Can I keep living in the house after selling it to my children?
You can, but it may affect inheritance tax. If you sold below market value and keep living there without paying a full market rent, the gifted part may be treated as a gift with reservation of benefit and stay in your estate. A written tenancy at market rent is one approach, but it needs specialist advice.
Will selling to family below value affect care funding?
It may. If a council decides you gave away value to reduce what you pay for care, it can treat you as still having that money under deprivation of assets rules. There is no fixed time limit; the council looks at your reasons and timing. Our guide to paying for care explains how assessments work.
Can my child get a mortgage to buy my house at a discount?
Often, yes. Some lenders accept the discount as all or part of the deposit, sometimes called a gifted deposit or gifted equity, and may ask for a letter confirming it is a gift. Criteria vary between lenders, and they will want an independent valuation. A mortgage adviser can check which lenders consider this.