Private Wealth & Tax & Estate Planning & UK trusts, tax and estate planning

Can I give my home to my children (and still live in it)?

Is it possible for parents to give their home to their children and keep living there? How can you ensure this type of gifting is tax effective?


For many people, their home is one of their most valuable assets, if not the most valuable. It is therefore an obvious candidate for lifetime estate planning.

The question therefore often comes us as to whether it is possible for parents to give their home to their children and keep living there. The answer to this question is yes, but with significant caveats if the gift is to be effective for tax purposes.

Inheritance tax

Generally speaking, if you make a gift to someone and then live for seven years afterwards, the gift is completely free of inheritance tax (IHT). However, one major exception to this is that, if you continue to benefit from the asset you have given away, the value of the asset remains in your estate for IHT purposes (known as a gift with reservation of benefit, or GROB). Continuing to occupy a property you have given away is a classic example of this.
There are, however, ways in which you can make an IHT-effective gift of your home, or a share of it, to your children even though you wish to continue living there:

  • One is to pay a full market rent for your occupation of the property. This should be properly negotiated between parents and children, with evidence that it is a fair market rent. Clearly, this comes with significant cash flow implications, and also tax “leakage”, because the children will have to pay income tax on the rent they receive from their parents.
  • Another option is open if one or more children lives with their parents. There is an exception to the GROB rules where a share of a property is given, and the donor and don’t share occupation. There is no statutory limit on the percentage of the property given, but HMRC will query it if the percentage is too large. It is also important that the parents continue to bear at least their fair share of the property’s running costs. It must also be borne in mind that if the child moves out then the whole value of the property falls back into the parents’ estate for IHT.

Capital gains tax

Another thing to bear in mind is capital gains tax (CGT). A gift of a property is a disposal for CGT purposes. Gains on your main residence are generally fully relieved from CGT. However, if you have not lived in the property for the whole time you have owned it, there is a risk that there may be some CGT to pay on the gift.


This article is part of our Lifetime Giving series. Click here to view our latest article on US/UK giving.




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Peter Daniel

Partner - Head of Private Wealth


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