Gifting Property and Deed of Gift: CGT, IHT, SDLT and the Tax Traps

Gifting a property to a family member triggers CGT on the donor at the current market value under TCGA 1992 s.17 (charged at 18% or 24% for residential property in 2026/27), even though no cash changes hands. The IHT 7-year clock starts on the date the deed of gift is executed under IHTA 1984 s.3A, but only if there is no reservation of benefit under FA 1986 s.102. Where the donee assumes an outstanding mortgage, that balance is SDLT chargeable consideration under FA 2003 Sch 4 para 8(1)(b). And if the donee is a minor child, rental income is attributed back to the parent under ITTOIA 2005 s.624 until the child turns 18. The deed evidences the gift date; it does not reduce any of these charges.

A deed of gift for a property is the legal instrument that records an unconditional transfer of ownership from donor to donee. For land, a deed is required by law: Law of Property Act 1925 s.52 provides that a conveyance of a legal estate in land must be by deed. A verbal gift of a house is not legally effective. Once the deed is executed and the change is registered at HM Land Registry, the gift is legally complete.

What the deed does not do is reduce your tax liability. Its value is entirely evidential. It establishes the date of the gift (which matters for CGT, for the IHT 7-year clock, and for the gift with reservation of benefit analysis) and provides evidence that the transfer was unconditional. Everything that follows flows from that date, across four taxes at once: CGT on the donor, IHT on the estate, SDLT where a mortgage is assumed, and income tax attribution where the donee is a minor child.

Most gifting guides are CGT-only. This one is not. The unique feature of property gifting is the multi-tax stack. Landlords who read a CGT-only guide and act on it typically miss the IHT reservation-of-benefit trap, underestimate the SDLT exposure on a mortgaged gift, and fail to anticipate the income attribution rules. This page covers all four taxes in one place, anchored to the deed of gift as the structural hook. For the CGT mechanics in full technical detail, see our dedicated companion page on CGT on gifting property to family members. For the wider portfolio tax strategy context, see our portfolio landlord tax planning guide.

What taxes apply when you gift a property

The table below summarises the multi-tax position across the most common gift structures. The rest of this page unpacks each cell.

Transfer type	CGT	IHT	SDLT
Gift to spouse or civil partner (living together)	No gain / no loss (s.58); gain deferred into donee's base cost	Exempt between spouses	Exempt if no chargeable consideration
Gift to adult child or sibling (no mortgage)	CGT at 18% / 24% on MV gain (s.17)	PET; 7-year clock starts	Nil (zero consideration)
Gift to adult child (mortgage assumed by donee)	CGT at 18% / 24% on MV gain	PET; 7-year clock starts	SDLT on assumed mortgage (Sch 4 para 8)
Gift to discretionary trust	CGT at 18% / 24%, or s.260 hold-over if a CLT	CLT; 20% entry charge on excess above NRB	SDLT if mortgage assumed

CGT: the donor pays tax on a disposal for which they received no money

The CGT position on a property gift is counterintuitive. You receive nothing. Yet you are treated as having sold the property at its current market value on the date of the gift. This is the connected-person market-value rule under TCGA 1992 s.17. Children, siblings and parents are all connected persons under TCGA 1992 s.286. So a gift to any of them triggers the s.17 deemed disposal at market value, regardless of the actual consideration.

The CGT must be funded by the donor from their own resources. The donee does not owe it; you do, as the person making the disposal. At residential property CGT rates, the bill can be substantial: 18% within the basic-rate band, 24% within the higher-rate band. HMRC's annual exempt amount (AEA) for 2026/27 is £3,000 and is applied before the rate.

Worked example 1: CGT on a BTL flat gifted to an adult child

David owns a buy-to-let flat with no main residence relief available. He paid £180,000 when he bought it. The flat is now worth £340,000 and has no outstanding mortgage. He gives the flat to his son Jake, an adult. Jake is a connected person under s.286.

Item	Amount
Deemed disposal proceeds (market value at date of gift, s.17)	£340,000
Less: original acquisition cost	(£180,000)
Less: incidental costs of acquisition (estimate)	(£2,500)
Gross gain	£157,500
Less: annual exempt amount (2026/27)	(£3,000)
Taxable gain	£154,500
CGT at 24% (higher-rate taxpayer, residential property)	£37,080

David pays £37,080 CGT on a gift for which he received nothing. He must fund this from savings or other resources. Jake's CGT base cost for any future disposal is £340,000 (the market value at the date of gift).

Hold-over relief under TCGA 1992 s.165 is not available here. Section 165 applies to gifts of business assets. A buy-to-let flat let on an assured shorthold tenancy is an investment asset. The CGT charge cannot be deferred. David must also file a 60-day return and pay CGT within 60 days of completion of the gift.

For the full CGT mechanics, including the spousal exemption, PPR interaction, and the s.260 trust hold-over route, see our CGT on gifting property to family members page. The balance of this guide covers the IHT, SDLT and income tax dimensions that a CGT-only guide misses.

SDLT: what happens when the gifted property has a mortgage

A pure gift of property with no outstanding mortgage carries zero consideration and no SDLT arises. Many landlords assume the same applies to a mortgaged gift. It does not.

Where a donee takes over (assumes) an outstanding mortgage as part of accepting a property gift, the mortgage balance constitutes chargeable consideration for SDLT. The statutory authority is FA 2003 Sch 4 para 8(1)(b): the debt released or assumed by the purchaser is treated as chargeable consideration. The chargeable consideration is capped at the market value of the property under para 8(2), a provision relevant only in negative equity situations. Standard residential SDLT rates apply to the assumed amount, including the 5% additional dwellings surcharge where the donee already owns another property.

Worked example 2: SDLT on a mortgaged property gift

Same facts as Example 1, but David now has an outstanding mortgage of £90,000 on the flat. Jake agrees to assume the mortgage as part of the gift.

• Chargeable consideration = assumed mortgage balance = £90,000 (FA 2003 Sch 4 para 8(1)(b)).
• MV cap check: market value is £340,000. £90,000 is below market value, so para 8(2) cap does not apply.
• Jake does not own another property, so no 5% additional dwellings surcharge.
• SDLT on £90,000: 0% up to £125,000. SDLT = nil.

The £90,000 mortgage falls entirely within the nil-rate SDLT band, so no SDLT is due in this scenario. If the mortgage had been £200,000, the SDLT computation would be: 0% on the first £125,000 = nil; 2% on the remaining £75,000 = £1,500. Total SDLT: £1,500. If Jake already owned another property (triggering the additional dwellings surcharge), the rates would be 5% on the first £125,000 (£6,250) plus 7% on £75,000 (£5,250), giving a total of £11,500.

Even a modest mortgage can create a material SDLT liability, and the surcharge can more than double the bill where the donee already has property. Verify SDLT exposure before committing to a mortgaged gift.

IHT: the 7-year clock and the PET regime

A gift of property to an individual is a potentially exempt transfer (PET) under IHTA 1984 s.3A. No IHT is payable at the date of gift. The gift becomes fully exempt if the donor survives 7 years from the date of the PET. The 7-year clock starts on the date the deed of gift is executed and legal title passes.

If the donor dies within 7 years, the PET becomes chargeable. The value brought into the IHT computation is the value of the gift at the date it was made (not the value at death). That value is set against the donor's available nil-rate band (£325,000, frozen to April 2030). Any excess above the NRB is charged at 40%. Taper relief under IHTA 1984 s.7(4) reduces the IHT tax charge (not the gift value and not the amount using up the NRB) where the donor survives at least 3 years.

Taper relief: what it reduces and what it does not

Years survived after gift	Reduction in IHT tax charge
Under 3 years	None
3 to 4 years	20%
4 to 5 years	40%
5 to 6 years	60%
6 to 7 years	80%
7 years or more	Fully exempt

Taper reduces the tax charge on the amount above the NRB, not the value used against the NRB. If the entire gift falls within the NRB, there is no IHT charge to taper anyway. The taper benefit only shows where the gift exceeds the available NRB and produces an actual tax charge.

Worked example 3: IHT PET and taper relief

David gifts the flat (market value £340,000) on 1 March 2027. He has made no prior chargeable lifetime transfers. His available nil-rate band is £325,000. David dies on 1 September 2032, which is 5 years and 6 months after the gift (within the years 5 to 6 taper band).

The PET becomes chargeable on David's death (he did not survive 7 years).

Item	Amount
PET value (at date of gift)	£340,000
Less: available nil-rate band (assumed unused)	(£325,000)
Chargeable excess	£15,000
IHT on chargeable excess at 40%	£6,000
Taper relief at 60% (years 5 to 6): reduction in tax charge	(£3,600)
IHT payable on the PET	£2,400

The full £340,000 still uses up David's NRB. Taper only reduced the £6,000 tax charge on the £15,000 excess above the NRB. Had David survived to 1 March 2034 (7 full years), the PET would have been fully exempt and no IHT would have arisen on the gift.

For a deeper treatment of when to pull the trigger on a mid-life BTL gift (weighing the upfront CGT cost today against the IHT saved on full survival), see our dedicated page on the IHT 7-year clock and mid-life property gifting strategy.

The gift with reservation of benefit trap

The most destructive IHT planning mistake in property gifting is continuing to occupy or benefit from a property after giving it away. Under FA 1986 s.102, if a donor gifts property but retains a benefit in it (for example, by continuing to live there rent-free or at below-market rent), the gift is a gift with reservation of benefit (GROB). Where GROB applies:

• The gift does not remove the property from the donor's estate. It remains fully chargeable to IHT on the donor's death as if the gift had never been made.
• No 7-year clock starts. The PET regime does not apply to a GROB gift.
• The IHT planning is entirely defeated.

The GROB rules are detailed in HMRC manual IHTM14300 and following. The most common trigger is a parent gifting their home to their children and continuing to live there. The gift looks effective from a legal title perspective but is a nullity for IHT purposes as long as the reservation continues.

Two escape routes exist. First, the donor can pay a full market rent to the donee for any continued occupation. A market-rent arrangement converts the arrangement into one without reservation (the donor is no longer benefiting at the donee's expense). Second, the donor can move out entirely. If occupation ceases, a new 7-year clock starts from the date the reservation ended, under the "gifts where reservation ceases" rules in FA 1986 s.102(4).

A related charge worth noting is the Pre-Owned Assets Tax (POAT) under FA 2004 Sch 15. Where a donor disposes of a property (including by gift) and later enjoys the use of it, POAT can impose an annual income tax charge on the benefit enjoyed, even where the GROB rules do not strictly apply because of a technical escape. POAT is a specialist area; professional advice is needed where any form of retained use is contemplated post-gift.

Care home fees: deliberate deprivation of assets

Local authorities in England assess a person's assets when determining eligibility for means-tested care funding. A property gift made with the intention of reducing assets to qualify for council-funded care can be treated as a deliberate deprivation of assets under the Care Act 2014 and the Care and Support (Charging and Assessment of Resources) Regulations 2014. Where a local authority concludes that a gift was motivated by the desire to avoid care fees, it can treat the gifted property as if it were still owned by the donor when calculating the care cost contribution. There is no fixed look-back period (unlike the IHT 7-year rule): local authorities can look back as far as they consider appropriate. The deliberate deprivation test turns on the donor's intention at the date of the gift; a gift made primarily for family reasons (IHT planning, income splitting) at a time when care needs were not a foreseeable consideration is lower risk. This is a distinct regime from HMRC's tax rules and requires separate specialist advice if care needs are a realistic prospect.

Income tax: rental property gifted to a minor child

Gifting a rental property to an adult child shifts the rental income to the child, who is taxed on it in their own right. This can achieve income-splitting where the child is a lower-rate taxpayer.

The same strategy does not work for minor children (under 18 and unmarried). Under ITTOIA 2005 s.620 and s.624, where a parent makes an outright gift of income-generating property to their minor child, the income from that property is attributed back to the parent-donor and taxed as the parent's income. The settlement provisions are broad: the gift does not have to be a formal trust arrangement for the attribution to apply. An outright deed of gift to a minor child suffices to engage the rules.

There is a narrow de minimis: under ITTOIA 2005 s.629(3), the attribution rule does not apply in a tax year where the total income arising to the child under the settlement does not exceed £100. Where a minor child holds a small fractional interest in a property and the rental income attributable to that fraction is £100 or less for the year, the parent-settlor attribution does not engage. This is a narrow exception; most residential property gifts to a minor will generate income well above £100 annually.

The attribution ceases when the child reaches 18. From that point, the rental income belongs to the child in their own right and is taxed on them. If income-splitting is the objective, the gift to an adult child (18 or over) achieves it; the gift to a minor does not, for so long as the child remains under 18.

Spousal transfers: no CGT, no IHT, but the gain is deferred not eliminated

A transfer of property between spouses or civil partners who are living together in the same tax year is a no-gain-no-loss disposal under TCGA 1992 s.58. No CGT arises at the point of transfer. The receiving spouse takes the donor's historic base cost (the original acquisition price), not the market value at the date of transfer. The gain is deferred: it crystallises when the receiving spouse later sells or disposes of the property, computed from the original base cost.

A spousal transfer is exempt from IHT between the spouses under IHTA 1984 s.18. It does not reduce the transferor spouse's estate for IHT planning purposes; the asset simply moves from one spouse to the other and remains within the family estate.

The s.58 no-gain-no-loss rule does not apply where the spouses are separated and living apart, or where the transfer occurs in a tax year after the year of separation. In those circumstances, the standard s.17 market-value rule applies and CGT may arise.

Records: what to keep after a property gift

Keep the following contemporaneous records after executing a deed of gift:

• The executed deed of gift (certified copy).
• The Land Registry TR1 form and the updated title register confirming the donee as registered proprietor.
• An independent RICS valuation of the property at the date of the gift. This supports the s.17 market-value CGT computation and the PET value for IHT. An inadequate or undated valuation is one of the most common reasons HMRC challenges the tax position on a gift years after it was made.
• Evidence of any mortgage assumed by the donee: lender confirmation of the outstanding balance at the date of the gift, supporting the Sch 4 para 8 SDLT computation.
• Correspondence or written evidence confirming the gift was unconditional and that the donor has no retained benefit (supporting the GROB analysis).

IHT enquiries can arise many years after the gift, on the donor's death. Records made at the time of the gift (particularly the RICS valuation and the deed itself) are essential. Courts and HMRC are sceptical of reconstructed valuations produced after the fact.

Gifting property vs a family investment company

A direct property gift crystallises CGT on the donor at market value immediately and starts a 7-year PET clock (assuming no GROB). A transfer of the same property into a family investment company (FIC) is also a deemed disposal at market value for CGT under s.17, but the subsequent management of the asset and the distribution of economic value to family members can be structured more flexibly through shareholding and dividend policy.

In a FIC structure, the property is held by the company. The donor parent typically holds preference shares or growth shares; adult children hold ordinary shares capturing future appreciation. Subsequent gifts of shares to family members may attract minority discounts for IHT purposes, potentially reducing the value brought into IHT. Income retained inside the company is taxed at corporation tax rates (25% for profits above £250,000 in 2026/27). The FIC does not avoid CGT on the initial transfer; it defers and restructures the IHT position and provides income-distribution flexibility the direct gift does not.

The FIC comparison is covered in detail on our family investment company mechanics page. As a rule, the direct gift is simpler and cheaper to execute; the FIC is appropriate where the property portfolio is substantial, the estate planning horizon is long, and the cost of company set-up and ongoing compliance is justified by the structural benefits.