Gifting a Rental Property to Your Children: CGT & IHT
A gift is a disposal at market value for CGT, due within 60 days — then a 7-year Inheritance Tax clock with taper relief starts. What's sourced, what isn't, and a worked illustration.
The short answer
Gifting a rental property to your child triggers two separate taxes, not one. For Capital Gains Tax it is a disposal at market value, reportable and payable within 60 days — even though no money changes hands. For Inheritance Tax it is a potentially exempt transfer that only leaves your estate for good if you survive seven years and give up any benefit from the property. Get the order of these two taxes wrong and the CGT bill lands as a surprise months before the IHT question is even relevant.
Tax one: Capital Gains Tax, due within 60 days
A gift is still a disposal for CGT purposes. gov.uk's own rule for what value to use is explicit about this: its market-value table lists “Gifts — Date of gift” as the row that applies — meaning you use the property's market value on the day you gift it, not what you originally paid and not zero, even though you received nothing for it. The gain is calculated exactly as if you'd sold it on the open market that day.
That gain is then reported and paid on HMRC's usual clock for UK residential property: “You must report and pay any Capital Gains Tax on most sales of UK property within 60 days.” A gift counts as a disposal for this rule the same as a sale does — the 60-day window starts on the date you gift the property, and it is easy to miss precisely because no completion statement or solicitor is prompting you the way a sale would.
“But I didn't get any money to pay the tax with.” This is the single most common problem with gifting a rental property outright. The market-value CGT charge is due in cash within 60 days regardless of whether the gift generated any proceeds — work out the likely bill with our CGT calculator and check the exact date against our 60-day deadline calculator before you gift, not after.
Tax two: Inheritance Tax, and the seven-year clock
Once the CGT is dealt with, the gift moves into IHT territory. gov.uk's rule: “People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years.” A gift of a rental property to your child is what HMRC treats as a potentially exempt transfer — it leaves your estate entirely, with no IHT due on it, provided you survive seven years from the date of the gift.
If you die within those seven years, the value of the gift can still be charged to IHT, but not always at the full 40% rate. Where the gift exceeds the nil-rate band, taper relief reduces the tax due (not the value of the gift itself) the longer you survive after making it. This site's own Inheritance Tax calculator applies gov.uk's taper table on your figures — the same rates are set out below for reference.
| Time between gift and death | Rate charged on the tax due |
|---|---|
| Died within 3 years of the gift | 40% — no taper |
| Year 3–4 after the gift | 32% |
| Year 4–5 after the gift | 24% |
| Year 5–6 after the gift | 16% |
| Year 6–7 after the gift | 8% |
| Survived 7 full years | 0% — fully outside the estate |
Taper table per gov.uk’s Inheritance Tax gifts guidance (checked 4 Sep 2026), the same table our IHT calculator applies — see that page for the full nil-rate band and residence nil-rate band mechanics behind it.
Keep the rent, or move in, and the gift may not count
If you carry on receiving the rent, or move into the property yourself, without paying a market rent for the privilege, HMRC's gift with reservation of benefit rules apply — the property can be pulled back into your estate for IHT as if you'd never given it away, regardless of how many years have passed. The legal test is detailed and fact-specific, so we do not reproduce it here. Confirm your specific situation with a solicitor or tax adviser before assuming a gift with strings attached has actually left your estate.
What holdover relief does not fix here
Some CGT reliefs let a gift's gain roll over onto the recipient instead of being taxed immediately on the giver. Those reliefs are aimed at business assets such as a trading business or agricultural property; an ordinary rental letting is not normally treated as a business asset for this purpose, so do not assume the gain can be rolled over. Treat the 60-day CGT charge above as due in full unless an adviser has confirmed that a specific relief applies to your situation.
The income is your child's from the day of the gift
Once the property is genuinely gifted — and you've stopped receiving any benefit from it — the rental income belongs to your child, not you, and they declare it on their own Self Assessment (or start one, via the same route our deadlines guide covers) once their income requires it.
If your child is under 18, different rules apply to gifts to under-18s — broadly, income from a parental gift can in some circumstances still be taxed on the parent rather than the child. The rules have their own thresholds and exceptions which we do not set out here; get advice before gifting to a minor and assuming the income is taxed in their hands.
Stamp duty, if there's a mortgage attached
Where the property being gifted still has a mortgage on it, the recipient may be treated as having given “consideration” equal to the debt they take on, which can trigger Stamp Duty Land Tax even though no cash was paid. Whether SDLT is due, and how much, depends on the size of the debt taken on against the SDLT thresholds — if the property you're gifting is mortgaged, get this checked before you sign anything.
Worked illustration
This is an illustration of how the two taxes interact, not advice for a real case. A landlord gifts a rental flat worth £280,000 (bought years ago for £150,000) to their son, keeps no benefit from it, and dies five and a half years later.
| Step | Illustration |
|---|---|
| CGT gain on the gift (market value − cost) | £280,000 − £150,000 = £130,000 |
| Less the annual exempt amount | £130,000 − £3,000 = £127,000 taxable |
| CGT at 24% (higher-rate landlord, illustrative) | ≈ £30,480, due within 60 days of the gift |
| IHT position if death is 5–6 years after the gift | Taper applies at 16% of the tax otherwise due, on the value above the nil-rate band |
| Full nil-rate band, RNRB and spouse-transfer mechanics | See the Inheritance Tax calculator for your own figures |
Notice the two taxes are decided at completely different moments: the CGT bill is fixed and payable within 60 days of the gift, on 2026/27 values; the IHT taper depends entirely on how long the giver survives afterwards, which no one can plan around with certainty.
What to do first, in order
- 1. Work out the CGT. Use the Capital Gains Tax calculator on the property's current market value versus what you paid, before you commit to the gift.
- 2. Fix the 60-day deadline. Once you gift, the clock starts — check the exact date with the 60-day deadline calculator so the report and payment don't slip.
- 3. Model the IHT taper. Run the gift through the Inheritance Tax calculator to see where it sits against the nil-rate band and what the seven-year taper means for your estate.
- 4. Compare it with a company transfer. Gifting isn't the only route out of personal ownership — see transferring property to a limited company for the alternative, and why it carries its own market-value CGT and stamp duty charge.
gov.uk/capital-gains-tax/market-value (gifts use market value at date of gift, checked 4 Sep 2026) · gov.uk/tax-sell-property (60-day report-and-pay rule, checked 4 Sep 2026) · gov.uk/inheritance-tax (£325,000 threshold, 7-year gift rule, checked 4 Sep 2026) · taper table and residence nil-rate band as already verified in site/taxdata.py and applied on our Inheritance Tax calculator (checked 4 Sep 2026). Gift with reservation of benefit, holdover relief, under-18 rules and SDLT on an assumed mortgage debt are summarised in outline only, not quoted from gov.uk — take advice on those points.
Quick answers
Yes, but it triggers Capital Gains Tax immediately — gov.uk treats a gift as a disposal at market value, reportable and payable within 60 days, even though no money changes hands. Separately, the gift's value only leaves your estate for Inheritance Tax if you survive seven years and keep no benefit from the property.
Two taxes apply. Capital Gains Tax is due within 60 days on the gain at market value, regardless of price paid. Inheritance Tax only bites if you die within seven years of the gift, with taper relief reducing the tax due the longer you survive — 40% within 3 years, tapering to 8% in years 6–7, then 0% after 7 full years. Keeping the rent or living there without paying market rent can pull the gift back into your estate under HMRC's gift-with-reservation rules.
gov.uk's own wording: "People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years." Gifts made more than seven years before death are outside the estate entirely; gifts made within seven years can be taxed on a sliding taper depending on exactly how long you survived.
Yes. gov.uk's market-value rule applies to gifts specifically — the row for gifts uses the property's value on the date of the gift, not what you paid for it and not the (zero) amount you received. The gain is worked out and reported within 60 days exactly as it would be for a sale.