Last updated: 14 October 2026
Can you transfer your home to your children to save inheritance tax?
You can, but it rarely works if you carry on living there. If you give your home to your children and keep living in it without paying a full market rent, it’s a “gift with reservation of benefit” and stays in your estate for inheritance tax (IHT). The gift may also create capital gains tax (CGT) for your children when they sell, and stamp duty if they take on a mortgage. For most families, the residence nil-rate band, wills and lifetime gifts of other assets are more effective.
The main IHT rules for homes
| Rule | What it means |
| Nil-rate band | £325,000 per person, frozen until April 2031 under current plans |
| Residence nil-rate band | Up to £175,000 extra when a home passes to direct descendants |
| Transferable allowances | Unused bands pass to a surviving spouse or civil partner |
| Taper | The residence band is reduced by £1 for every £2 the estate exceeds £2 million |
| 7-year rule | Outright gifts are exempt if you survive 7 years |
A married couple can pass up to £1 million, including a home, to their children free of IHT.
Gifts with reservation
If you give away your home but keep using it, HMRC treats it as still yours for IHT. To avoid this, you must either move out or pay your children a full market rent, which is taxable income for them. Paying market rent can work for some families, but it’s expensive.
Pre-owned assets tax
If you avoid the reservation rules in other ways, for example by gifting cash to children who then buy a home you live in, an income tax charge called pre-owned assets tax can apply.
CGT for your children
When you gift your home, your children take it at its market value at the date of the gift. If it’s not their main home, they’ll pay CGT on any growth when they sell. If you keep it until death, they inherit at probate value with no CGT on growth during your lifetime.
Example
Jean and Peter own a £900,000 home and £200,000 of savings. If they leave everything to their children, their combined allowances of £1 million mean IHT of £40,000 on the remaining £100,000. If they had given the home away while still living there rent-free, the IHT would be the same, and their children would have lost the CGT uplift on death.
Alternatives worth considering
- Use the £3,000 annual exemption and regular gifts from surplus income
- Gift cash or investments you don’t need, and survive 7 years
- Downsize and pass on the difference; the downsizing addition protects the residence band
- Leave the home to direct descendants in your will
- Life insurance written in trust to cover expected IHT
Frequently asked questions
Can I give part of my home to a child who lives with me?
Yes. If you share the home and costs, it may not be a gift with reservation.
Does putting the house in my children’s names avoid care fees?
Councils can treat it as deliberate deprivation.
Is stamp duty payable on a gift?
Only if the child takes on a mortgage above the threshold.
Can a trust help?
Sometimes, but trusts have their own IHT charges.
Related: can gifting my home reduce inheritance tax and reducing an estate below £2 million.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with passing your home to your children. See our inheritance tax advisers service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
