Signing over your home to your children [2026 Update]

The growth of house prices has come as a shock to many people. If you are considering gifting property to children UK homeowners often discover in their later years that they are wealthy beyond their wildest dreams, but this wealth comes with significant tax drawbacks.

But this wealth comes with drawbacks. The taxman will help himself to a large slice of it when you are gone, while children and grandchildren cannot get on the property ladder. Some people try to solve the problem by gifting their home to the younger generation.

But it may not be as simple as it might seem.

You can give your property to your children at any time, even if you still live in it. But you need to be aware of the costs you could face.

The Inheritance Tax rules

The Residence Nil-Rate Band (RNRB) has been frozen at £175,000 since 2020. When combined with the standard £325,000 threshold, a single person can pass on £500,000, and a married couple or civil partners can pass on up to £1 million tax-free (assuming the home is left to direct descendants).

You could make an outright gift of the house. If you were to survive for seven years, there would be no IHT bill. But if you died within seven years, the property would fall back into your estate for IHT purposes.

This might look as though the sooner you sign the property over the better, but if you still live in it, this is regarded as a “gift with reservation of benefit.” This means the house will remain part of your estate on your death, even if you live beyond those seven years. One way around this is by paying full market rent to your children. A pound at Christmas will not do; it must be the market rate, and HMRC now requires documented proof this was paid throughout the period. Your children will also be liable for income tax on that rent.

Capital gains tax

As of April 2025, the CGT rates for residential property are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Furthermore, the annual tax-free allowance has been slashed to just £3,000 per person.

This will also apply to a second home or holiday home. It is regarded as an investment, and CGT will be charged on any increase in value between first owning it and giving it away.

You could become homeless

Once you have signed over your property, you will no longer be the legal owner. Your children can do what they want – after all, it is their property. If you fall out, or if they want to sell, you could face eviction.

Another scenario is divorce. Your son or daughter’s ex would have a claim against their estate, which would include your home. If they were to become bankrupt, the property would be at risk from creditors. If you outlive your children, the property passes to their beneficiaries, who are unlikely to include you.

Care fees

Your local council will charge if you go into a care home. There is a common misconception that a “7-year rule” applies to care fees as it does to IHT. In 2026, it is vital to clarify that there is no time limit for local council look-backs regarding “deliberate deprivation of assets.” If they believe the intent was to avoid fees, they can assess you as still owning the home even if the gift was 10 or 15 years ago.

What should you do?

Signing over a property has tax and other financial implications. Seeking specialist advice before making any decision is essential. At Continuum, we can provide it.

The value of investments can fall as well as rise and you may get back less than you invested.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Estate planning is not regulated by the FCA.