Can I gift my children a share in my house to cut my inheritance tax bill?

Angela Murfitt
18 January 2017


I have owned my house since the 1970s and it has gone up in value over the years. It is now worth around £3 million. I would like to downsize and use some of the money to help my two children. I was planning on selling and giving each of my children a slice of the capital.

However, I’ve now had the idea that I could gift a third of the house to each of my children so we each own a third. I would then rent out the house and split the proceeds between us.

This would give them money they could invest and me enough to rent a flat.

My hope would be that, as long as I survive for another seven years, my children would only have to pay inheritance tax (IHT) on the third of the property that I own.

Does this seem like a sensible idea, and am I right in my assessment of my children’s inheritance tax bill?



The position regarding the gift for inheritance tax purposes would be the same whether you sold your property and gifted your children the cash or indeed if you gifted them a share of your property.

This gift would be a potentially exempt transfer and provided you survived seven years from the date of gift, this would indeed fall outside your estate for inheritance tax (IHT) purposes, provided you did as you intend and move out of the property.


There would be no capital gains tax (CGT) in either case as it is your principal private residence and specifically exempt from CGT. The transferred shares of the property would be deemed an investment property for your children and any increase in value during their ownership would be assessable for CGT at the point of sale. Owningother property can also now have Stamp Duty Land Tax (SDLT) implications if your children decided to purchase a new home.

As they would be classed as owning more than one property, this could involve additional second home SDLT, which is higher than they would ordinarily pay if they only owned one property.


If you were to transfer shares in your property and survive the necessary seven-year period, then you are correct in that your children would only have to worry about IHT on your share – but this could further be reduced by the new Residential Nil Rate Band which comes into effect from 2017 on a sliding scale (£100,000 initially, then rising by £25,000 each tax year until the full allowance of £175,000 becomes applicable in 2020).

This would mean that an additional £175,000 could be added to your own nil-rate band, currently £325,000, therefore reducing the amount of your property share which would be subject to inheritance tax. If your whole estate is worth more than £2 million, then this additional allowance is reduced by £1 for every £2 your estate is over this limit.