Giving somebody a house as a gift is a very generous and meaningful gesture since a home is considered one of the most valuable assets a person can own. Houses are typically gifted to family members such as spouses or children. Still, as a homeowner, you can gift your property to anybody you like.
However, it’s essential to understand the legal and financial implications involved in such a gift. In this blog, we’ll dive deeper into the reasons for giving a house as a gift, the pros and cons, and some of the main things to be aware of before beginning the process.
Can you give a house as a gift?
Yes, you can give a house as a gift. Still, it’s essential to remember that a home is a significant asset with legal and financial implications for both parties involved.
When you give a house as a gift, it’s vital to ensure that the transfer of ownership from yourself to the recipient is done legally and through the correct channels.
Why would you give a house as a gift?
People give houses as a gift for many reasons. While some motivations are more common than others, you can decide to provide a house to someone for any reason. In most cases, it’s one of the following:
- To provide a home for a loved one:
You could give a house to a relative, such as an adult child or grandchild, to help them get on the property ladder and provide them with more financial security.
- As a reward for achievements:
Giving property as a gift can be a way to reward someone, usually a child or another relative. Often, it’s for a significant achievement such as completing a university education, getting married, or having their first child.
- To help somebody in need:
You may give a house gift to somebody important to you who is struggling financially. It can be a great way to provide support and help them get back on their feet.
- To plan your estate:
Giving property as a gift can transfer your wealth to the next generation while avoiding inheritance tax.
- To avoid capital gains tax:
You might avoid paying capital gains tax on the sale of the property by giving the house to a relative or friend as a gift rather than selling it.
It is essential to be aware of the legal and financial implications for both parties when giving a house as a gift. No matter your reasons for wanting to provide a home to someone, it’s crucial to seek professional advice before proceeding.
Pros and cons of giving a house as a gift
There are several advantages to giving a house as a gift – both for financial reasons, and other.
Firstly, giving a house as a gift can be a generous, meaningful gesture. It also enables you to help somebody in a significant way.
Furthermore, the recipient can avoid paying the costs associated with traditionally buying a house. Giving a house as a gift can also be an ideal way to transfer your wealth to your children without paying taxes on the property sale.
On the other hand, there are drawbacks to giving a house as a gift. Firstly, the process of ownership transfer can be complicated. There may also be legal fees to pay.
In addition, the person gifting the house may be giving up a valuable asset they may have been able to sell for a profit. The recipient may also be responsible for paying taxes and maintenance costs.
Things to keep in mind when giving a house as a gift
Are you considering giving someone in your life the gift of a home? In that case, there are several important factors to remember before you begin the process.
- Ensure the transfer of ownership is legally recognised.
You should always work with a solicitor to lawfully transfer the deeds in the same way you would when selling the house to a new owner.
- Consult a tax professional.
It’s essential to be clear on any tax implications for you and the recipient. If you’re giving a house as a gift to avoid inheritance tax in the future, be aware that the recipient may still be required to pay this tax if you pass away within seven years.
As the previous property owner, you may still be liable to pay capital gains tax when gifting a house. This may be the case if the property’s value has increased since you first acquired it.
- Consider Stamp Duty.
You’ll need to consider Stamp Duty Landy Tax if you plan to give a house as a gift to somebody who has owned property before.
They may be required to pay Stamp Duty if they take over an outstanding mortgage on the gifted house.
- Consider the financial impact on yourself.
Before giving a house as a gift, consider the effect it might have on your financial security and estate planning.
If you are gifting a house that you currently rent out to tenants, consider how this will impact your ongoing income.
- Make sure the recipient can afford to own the house.
Consider if the person you’re giving the house to can afford the property ownership. Think about the regular bills, maintenance, and upkeep costs before you decide if it’s the right gift for them.
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