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Can I Sell a House That was Gifted to Me?

Property Saviour » Inherited Property » Can I Sell a House That was Gifted to Me?

If you’ve been gifted a property but don’t want to keep it, you may ask yourself, “Can I sell a house that was gifted to me?” The answer is yes. It is legal to receive a property from another person as a gift and then sell it.

After you receive the property via Deed of Gift, the previous owner will have no claim over it. It will officially be yours, and you will be responsible for any and all decisions associated with the house.

Surprisingly, gifting property has become a popular way for people to become homeowners. So, why is this happening? Most property owners prefer to give away their assets while they’re still alive to limit the inheritance tax upon their death.

As a recipient of the gift, it’s important to understand what needs to be done, particularly regarding taxes, when you decide to sell the property.

In this guide, we’ll explore the process of selling property that you’ve received through a Deed of Gift or a Transfer by Way of Gift, both terms referring to the same legal process.

We’ll examine the tax implications of such a sale, discuss the typical timelines, and identify the most efficient strategies to ensure a quick and smooth transaction.

Table of Contents

Understanding Property Gifts

When someone gives you a property as a gift, it’s typically done through a Deed of Gift or a Transfer by Way of Gift. Once this process is complete and the property is legally in your name, you have full control over it. This means you can live in it, rent it out, or indeed, sell it.

If a house was gifted and parents go into a care home, it may be treated as deprivation of assets.

The Process of Selling a Gifted Property

Selling a gifted property is similar to selling any other house you own. You’ll need to:

  1. Get a valuation
  2. Decide on a selling method (estate agent, auction, or private sale)
  3. Prepare the property for viewings
  4. Accept an offer
  5. Complete the legal process with a solicitor

What Happens if I Sell a Gifted Property?

Selling a property that you received as a gift is similar to selling any other house or asset you own. The main difference might be the tax implications of this type of transaction, depending on your situation.

The two primary taxes linked to inherited or gifted properties are Capital Gains Tax and Inheritance Tax. However, Stamp Duty Land Tax (often referred to as SDLT or simply Stamp Duty) and Income Tax might also apply in certain cases.

When Do You Pay Capital Gains Tax?

Capital Gains Tax (CGT) is charged on the profit or gain when you sell or dispose of an asset that has increased in value since you acquired it. When a property is gifted or transferred through a Deed of Gift, the donor (the person giving the gift) is treated as having sold the property at its market value at the time of the transfer.

The donor may be liable for CGT on any gain above the annual exempt amount (£3,000 for the 2023/24 tax year).
If the recipient (the person receiving the gifted property) later sells the property, they will be liable for CGT on any gain above the annual exempt amount, calculated based on the property’s value when they received it as a gift and the eventual selling price. 

If the gifted property becomes the recipient’s main residence, they may be eligible for Private Residence Relief, which can reduce or eliminate the CGT liability when they eventually sell the property. The CGT rate for residential property is:

  • 18% for basic rate taxpayers
  • 28% for higher/additional rate taxpayers and non-UK residents

 

The statement about CGT not being payable when gifting property to a spouse or civil partner is correct. However, the spouse/civil partner may be liable for CGT when they eventually sell the property. In summary, the key points are:

  • The donor may be liable for CGT when gifting the property
  • The recipient may be liable for CGT when selling the gifted property (unless it’s their main residence)
  • CGT rates are 18% or 28%, depending on the individual’s tax rate
  • No CGT is due when transferring property between spouses/civil partners.

 

Capital Gains Tax Allowance

  • For the 2023/24 tax year, the CGT annual tax-free allowance is £3,000.
  • This allowance applies to total gains from all chargeable assets disposed of during the tax year.
  • The allowance cannot be combined between individuals, even if they jointly own the property.  Each person gets their own £3,000 annual exemption.
  • If the total taxable gains exceed the £3,000 allowance, CGT is payable on the excess amount at the appropriate tax rate (18% for basic rate taxpayers, 28% for higher/additional rate taxpayers and non-UK residents).
  • When gifting a property, the disposal is treated as if the property was sold at market value for CGT purposes unless it is being transferred to a spouse/civil partner.  Any gain above the £3,000 allowance would be subject to CGT.
Can I sell a house that was gifted to me
Often a gifted property needs a little bit of TLC and improvement.

When Do You Pay Inheritance Tax?

Here’s a more engaging rewrite on Inheritance Tax (IHT) for gifted properties:

 

Inheritance Tax on Gifted Properties

Inheriting or receiving a property as a gift can be a windfall, but the taxman may come knocking if the donor’s estate exceeds a certain threshold. Let’s dive into the intricate world of Inheritance Tax (IHT) and how it applies to gifted properties.

 

The £325,000 Threshold

If the total value of the donor’s estate, including the gifted property, exceeds £325,000, IHT may be due. However, the donor’s estate typically covers any IHT payable upon their death. But beware – if the total value of gifts given within seven years before the donor’s passing reaches or exceeds £325,000, any additional gifts beyond this value could be subject to taxation for the recipients.

 

The Ticking Tax Clock

The amount of IHT due on a gifted property depends on the time elapsed between the gift date and the donor’s passing. The longer the gap, the lower the tax rate:

  • Within 3 years: 40% IHT
  • 3-4 years: 32% IHT
  • 4-5 years: 24% IHT
  • 5-6 years: 16% IHT
  • 6-7 years: 8% IHT


After seven years, the gifted property becomes entirely exempt from IHT – a sigh of relief for the recipient!

 

The Spousal Exemption

Lovebirds, rejoice! IHT is not payable on gifts given to a spouse or civil partner, making it a tax-efficient way to transfer assets between partners.

 

The Estate Expansion

While you may not have to pay IHT when selling a gifted property, receiving such a valuable asset can significantly increase the value of your own estate. If this pushes your estate above the £325,000 threshold, it could have IHT implications for your beneficiaries down the line.

 

The £3,000 Annual Allowance

Each individual has an annual IHT allowance of £3,000, meaning gifts valued below this amount can be given tax-free each year. However, IHT may still apply to larger gifts or valuable properties.

Remember, IHT is a complex matter, and it’s always wise to seek professional advice.

Do You Pay Stamp Duty on Gifted Property?

Receiving a property as a gift can be a dream come true, but the taxman may have other plans. Enter Stamp Duty Land Tax (SDLT), a potential party pooper when it comes to gifted properties. Let’s unwrap this tax conundrum with a touch of humour.

 

 

The Mortgage Minefield

If the gifted property comes with a mortgage attached, you may need to brace yourself for SDLT. But fear not. There’s a threshold to cross before the tax kicks in. As of now, if the outstanding mortgage value exceeds £125,000 for a residential property, you’ll need to pay your dues.

 

 

The Stamp Duty Staircase

Once you’ve crossed the mortgage threshold, the SDLT rates climb like a staircase, with each step representing a higher property value range. Buckle up, and let’s take a whimsical tour:

  1. £125,001 to £250,000: 2% SDLT – a gentle start, but still a pinch.
  2. £250,001 to £925,000: 5% SDLT – now we’re talking serious money.
  3. £925,001 to £1.5 million: 10% SDLT – a hefty sum for a lavish gift.
  4. Above £1.5 million: 12% SDLT – the tax equivalent of a luxury penthouse.

 

The Chargeable Consideration Curveball

But wait, there’s more! If you’ve given any “chargeable consideration” in exchange for the property – be it cash, assets, or even a service – you may still be liable for SDLT, even without a mortgage. It’s the taxman’s way of ensuring no gift goes untaxed.

 

 

The Ever-Changing Landscape

Remember, these rates and thresholds are subject to change, just like the tides of tax policies. So, it’s always wise to stay updated and seek professional advice for this ever-shifting landscape.

While receiving a gifted property can be a dream come true, the taxman’s stamp of approval may come at a price. But fear not, with a little knowledge and a dash of humor, you can tackle SDLT like a pro and enjoy your gift to the fullest.

Do You Pay Income Tax on Gifted Property?

Receiving a property as a gift can be a dream come true, but the taxman's watchful eye never rests. While you may not have to pay Income Tax simply for owning the gifted property, the moment you start generating income from it, the tax authorities will come knocking.

If you’ve decided to put your gifted property to work by renting it out, congratulations – you’ve just entered the Income Tax arena. The taxman sees rental income as fair game, regardless of whether the property was gifted or purchased. It’s like a game of financial whack-a-mole, where the taxman is always ready to strike.

 

Declaring Your Rental Riches

When it comes to paying Income Tax on rental income, honesty is the best policy. You’ll need to declare your rental earnings to HMRC, just like any other form of income. Failure to do so could land you in hot water, with penalties and interest charges that could make your rental profits evaporate faster than a puddle on a summer day.

 

The Tax Rate Rollercoaster

The amount of Income Tax you’ll pay on your rental income depends on your overall taxable income for the year. If your total income falls within the basic rate tax band, you’ll pay 20% tax on your rental profits. But if your income soars into the higher or additional rate bands, be prepared to part with 40% or even 45% of your rental riches.

Often a gifted property needs a degree of updating
A gifted property may need some updating to make it compliant to rent or sell on the open market. But why not sell it as is?

Potential Pitfalls

While selling a gifted property can be straightforward, there are some potential issues to watch out for:

  1. The seven-year rule: If the gifter dies within seven years, there could be IHT implications.
  2. Mortgage complications: If there’s an existing mortgage on the property, this will need to be dealt with before you can sell.
  3. Family disputes: Selling a gifted property can sometimes lead to family disagreements, especially if other family members feel they have a claim to the property.
  4. Hidden debts: Ensure there are no outstanding debts or charges against the property before you sell.

Can I sell a house immediately after it’s been gifted to me?

Yes, once the property is legally in your name, you can sell it at any time. However, consider the potential tax implications, especially if the gift was recent.

Do I need to pay tax on a house that was gifted to me?

You don’t pay tax on receiving the gift, but you may need to pay Capital Gains Tax if you sell the property for more than its value when you received it.

What if the property was gifted to me and my siblings?

If the property was gifted to multiple people, all owners would need to agree to the sale. It’s crucial to have clear communication and potentially seek legal advice in this situation.

When Can I Sell a Gifted Property?

You’ve just received the ultimate gift – a property handed over with a shiny bow on top. But what if you’re not quite ready to move in or keep it as an investment? Fear not, for the option to sell is always on the table, and in some cases, it might be the wisest move. 

 

The Taxman’s Ticking Time Bomb

As time ticks by, the value of your gifted property may soar like a rocket, leaving you with a hefty Capital Gains Tax bill when you eventually sell. The longer you hold onto the property, the larger the perceived “profit” in the eyes of HMRC and the bigger the tax bite. It’s like a ticking time bomb, and the only way to defuse it is to sell sooner rather than later.

 

The Maintenance Mayhem

Owning a property is no walk in the park, especially if you’re unprepared to handle the upkeep and maintenance. If left unchecked, your gifted abode could start to resemble a haunted house, with cobwebs in every corner and creaky floorboards that would make even the bravest soul shudder. By selling early, you can avoid the hassle and potential value-draining effects of neglect.

 

The Stress-Free Escape Hatch

Let’s face it: managing an additional property can be a real headache, especially if you’re already juggling a busy life. From dealing with tenants to coordinating repairs, the stress can quickly pile up like a towering stack of paperwork. Selling your gifted property early can be your escape hatch, freeing you from the burden and allowing you to focus on what truly matters.

 

The Liquid Asset Advantage

By selling your gifted property, you’ll transform it into a liquid asset—cold, hard cash that you can use however you see fit. Whether you’re investing in a new venture, paying off debts, or treating yourself to a well-deserved vacation, the possibilities are endless. It’s like turning a solid brick into a shimmering pool of financial freedom.

Remember, the decision to sell or hold onto a gifted property is a personal one, and there’s no one-size-fits-all solution. But if you find yourself overwhelmed or simply not needing an extra property, don’t hesitate to explore the selling option. 

The Gift That Keeps on Giving: Selling Your Gifted Property

At Property Saviour, we understand that receiving a gifted property can be both a blessing and a burden. While the gift itself is invaluable, the reality of owning and managing a problematic property can quickly become overwhelming. That’s where we come in – your trusted partner in unlocking the value of your gifted asset.

Sell to us, go away on a holiday, pay off your mortgage and put your feet up.

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