United Kingdom
Gifting a property: the tax bill nobody mentions
When you gift a property in the UK, HMRC treats the transfer as a deemed disposal at open market value. The donor must pay Capital Gains Tax on growth since acquisition, even though no cash is received. On a property bought for £100,000 and gifted at £400,000, a higher-rate donor owes £71,280, payable within 60 days. Unlike an inheritance, where base cost steps up to probate value, lifetime gifts do not wipe out historical capital gains.
| Disposal value for lifetime gifts | Open market value at date of gift |
| Donor's tax on £400,000 gift (cost £100,000) | £71,280 (higher-rate) |
| Recipient's tax selling at £500,000 (after gift) | £95,280 |
| Recipient's tax selling at £500,000 (if inherited) | £23,280 |
| Spouse or civil partner transfer | £0 (no gain, no loss) |
| Reporting & payment deadline | 60 days from completion |
What is capital gains tax on gifted property?
Many people assume that giving a home or buy-to-let to their children triggers no Capital Gains Tax because no money changes hands. Under UK tax law, gifting an asset to a connected person is classified as a deemed disposal under market value rules. HMRC treats you as having sold the property at its open market value on the day of the transfer.
| Step | Amount | Note |
|---|---|---|
| Original purchase price | £100,000 | Original acquisition cost |
| Market value at date of gift | £400,000 | Deemed sale proceeds |
| Gross capital gain | £300,000 | Growth subject to tax |
| Annual exempt amount | −£3,000 | Tax-free allowance for 2026/27 |
| Taxable gain | £297,000 | Net taxable amount |
| Donor's CGT bill (24%) | £71,280 | Due within 60 days |
Donor tax bill on gifting a second property bought for £100,000 now worth £400,000.
How to calculate capital gains tax on gifted property
When a property passes on death, its base cost resets to probate value. All unrealised gains during the deceased's lifetime are permanently extinguished. When a property is gifted during lifetime, the recipient takes on the donor's original base cost.
| Route | Base cost | Sale price | Taxable gain | Recipient CGT |
|---|---|---|---|---|
| Gifted during life | £100,000 | £500,000 | £397,000 | £95,280 |
| Inherited on death | £400,000 | £500,000 | £97,000 | £23,280 |
Recipient selling for £500,000 after receiving property worth £400,000. Higher-rate seller.
The difference in tax between inheriting and gifting is £72,000.
Can you gift property to your spouse tax-free?
Transfers between spouses or civil partners living together take place on a no gain, no loss basis. No Capital Gains Tax arises, and the receiving spouse inherits the original acquisition cost.
This rule is commonly used to transfer a share of property into the name of a lower-earning partner before a third-party sale, utilising two annual exempt amounts and basic-rate bands.
How much is capital gains tax on gifted property?
Any residential property gift that produces a CGT liability must be reported to HMRC and paid within 60 days of completion using the Capital Gains Tax on UK property service.
Failing to file triggers an automatic £100 late filing penalty, escalating with daily fines after three months.
What do people get wrong about gifting property?
- Assuming no tax because no money changed hands. HMRC uses market value for connected-person transfers.
- Not realising the recipient inherits the low base cost. Future CGT on sale is calculated from the donor's original price, not the market value at the date of the gift.
- Confusing gift with inheritance. Inheritance resets the base cost; a lifetime gift does not.
- Forgetting the 60-day deadline. Gifts of residential property must be reported within 60 days.
- Overlooking holdover relief. For business assets or certain trusts, holdover relief may defer the gain.
Work out your capital gains tax with the UK calculator
Common questions
Do I pay capital gains tax if I gift a property to my child?
Yes, unless the property was your only main residence throughout. Gifting a second home, rental, or holiday home is treated as a sale at market value.
How is capital gains tax calculated on a gifted property?
The gain is the open market value at the date of the gift minus your original purchase price and allowable costs. After the £3,000 annual allowance, tax is charged at 18% or 24%.
Is it better to gift a property or leave it in a will?
Leaving property in a will resets its CGT base cost to the probate value, wiping out lifetime gains. Gifting during lifetime triggers immediate CGT and passes the original low cost to the recipient.
Can I gift property to my spouse tax-free?
Yes. Transfers between spouses or civil partners living together happen on a no gain, no loss basis. No CGT is due.
When do I have to pay the tax on a gifted property?
You must report the gift and pay any CGT due within 60 days of the transfer completion date.
This is an estimate for general information only, not tax, legal or financial advice. Tax rules are complex and depend on your circumstances, and figures may not reflect the latest changes. Confirm your position with HM Revenue & Customs (gov.uk) or a qualified tax adviser before acting. The terms of use set out the limits of this estimate and of our liability.
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