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Read Full Bio >If you have received property as a gift, and if the previous owner has followed all of the steps required by law to transfer the title deeds to your name, you will have full control over the home and can use it, or “dispose of it”, in any way you wish.
Many homeowners who have received property in this manner find themselves asking the question “can I sell a property that was gifted to me?”.
The answer is simple. After you have received property via Deed of Gift, the previous owner will have no claim over it and it will officially be yours. Any and all decisions associated with the house will be your responsibility. This extends to its lease or sale.
In this guide, we’ll explore the process of selling property that you received via Deed of Gift or Transfer by Way of Gift (both of which refer to the same process).
We will discuss the tax implications of a sale of this kind, as well as looking at the timescales involved and the most practical methods to use in order to achieve a quick and hassle free process.
What Happens if I Sell a Gifted Property?
Selling a property that you received as a gift is much the same as selling any other house or asset you happen to own. The only potential difference is that, depending on your specific circumstances, there may be tax implications associated with certain transactions of this kind.
The two main taxes associated with inherited or gifted property are Capital Gains Tax and Inheritance Tax – although Stamp Duty Land Tax (often referred to as SDLT or simply Stamp Duty) and Income Tax may also be payable in specific situations.
When Do You Pay Capital Gains Tax?
Capital Gains Tax (CGT) is a levy on any profit that is made when selling an asset that has increased in value since it first entered into its owners possession.
Capital Gains Tax is most commonly paid by the donor of the property when it is passed on via Deed of Gift, rather than by the recipient. This means that if you have received property as a gift, it will usually be the gift giver who pays this tax, not you.
What’s more, if the gifted house is to become your primary residence, you will very rarely have to pay any Capital Gains Tax when you come to sell it.
However, when selling a gifted or inherited property that is not your main residence, you will probably need to pay Capital Gains Tax worth 18% of the difference between the home’s fair market value when you first received it and the amount for which it sells.
This is because the property will be considered an “asset”, and, in the eyes of the law and of HMRC, the act of selling it equates to the disposal of an asset for monetary gain.
It is worth noting that, at the time of writing, Capital Gains Tax is charged at a higher rate for those who earn above £50,270 per annum. The aforementioned 18% only applies to individuals paying the Basic Rate of tax.
You will not usually have to pay Capital Gains Tax if you sell or gift property to your spouse or civil partner. However, CGT may apply when they come to sell it.
Capital Gains Tax Allowance
When it comes to CGT, each individual currently has an annual tax-free allowance of £12,300 on all profits gained from the disposal of assets, though the precise threshold is subject to change year-on-year.
Simply put, Capital Gains Tax is not payable on the first £12,300 that you earn from disposing of an asset – which, in this case, means selling a gifted property that is not your main residence.
If you share the property in question with another individual, i.e. if the title was transferred by Deed of Gift into your name and someone else’s – your partner’s, for example – you may be able to combine your individual allowances.
This means that the tax free CGT threshold will be pushed up to £24,600 for your combined taxable profits.
It is not possible to carry your CGT allowance over to the next tax year if it has not been used.
You can find up to date information on Capital Gains Tax allowances and bands by visiting gov.uk.
When Do You Pay Inheritance Tax?
Inheritance Tax is payable on any gifted amount or asset when the gift giver’s estate is worth over £325,000. If this is the case, the estate will usually cover any amount of IHT payable upon their death.
However, if the total value of the gifts they have given within the seven years preceding their death has reached or exceeded £325,000, any additional gifts beyond this value will be subject to taxation payable by the recipients.
The amount of tax due depends on the time that has elapsed between the date of the gift being given and the date of the donor’s passing. To this end, IHT will be payable at:
- 40% should the donor die within three years of giving the gift
- 32% if the death occurs between 3 and 4 years of the gifting date
- 24% when 4-5 years has elapsed between the date of the gift and the date of the donor’s passing
- 16% if the death occurs within 5-6 years of the gift being given
- 8% when the time elapsed reaches 6-7 years
Property received as a gift will become exempt from IHT after 7 years following the date upon which the gift was given.
All relevant parties must pay Inheritance Tax within six months of the death of the estate owner or gift giver.
It is worth noting that IHT is not payable on gifts given to a spouse or civil partner.
IHT is usually only paid by the gift giver’s estate – or, occasionally, by the recipient – based on the value of the asset that has been gifted – not on the profits received when it is sold. This means that you may not be required to pay this tax when selling a gifted property.
However, upon receiving property as a gift, the value of your own estate will grow. This in itself is likely to have Inheritance Tax implications – particularly if it pushes you above the £325,000 threshold.
Inheritance Tax Allowance
Each individual has their own Inheritance Tax “allowance”, which currently equates to £3,000 per year. This means that Inheritance Tax can only be avoided if the total funds or assets given each year are valued below £3,000.
You can find out more about Inheritance Tax by looking at these useful guides: “Can I Sell My House and Give the Money to My Son?” and “What Happens When You Inherit a House from Your Parents?”. Further information is also available via gov.uk.
Do You Pay Stamp Duty on Gifted Property?
Stamp Duty is usually only payable on a gifted property if it has a mortgage attached – and only if the value of that mortgage is above the SDLT (Stamp Duty Land Tax) threshold for the type of property you have received.
As of the time of writing, if you do take on the remaining mortgage payments for a gifted property, Stamp Duty will be payable on residential property if the outstanding value of the mortgage is greater than £125,000.
If the property is worth between £125,001 and £250,000, you will be required to pay Stamp Duty at 2%.
Properties valued between £250,001 and £925,000 are subject to 5% SDLT.
For properties worth between £925,001 and £1.5 million, you’ll pay tax at 10%.
Finally, if the property is valued above £1.5 million, SDLT is likely to be payable at 12%.
The above figures may be subject to change year-on-year.
You may also be liable for this tax if there is any “chargeable consideration” involved. This is a sum, asset or service of monetary value that you give in exchange for the property.
Don’t forget that if you inherit property or receive it as a gift, you will no longer be considered a “first time buyer” and therefore will not qualify for Stamp Duty relief on your next property.
For the most recent information on SLDT, take a look at the relevant gov.uk page.
Do You Pay Income Tax on Gifted Property?
You will only be required to pay Income Tax on any gifted property if you have made money from it while it was in your possession – i.e. if you have rented it out to tenants.
Gov.uk offers further advice and guidance regarding Income Tax on property.
When Can I Sell a Gifted Property?
It is possible to sell a gifted property as soon as it is legally transferred into your name. In fact, if you are planning to sell, it’s often best to do this sooner rather than later. This is chiefly for the following reasons:
- If house prices rise significantly between the date on which you receive the gift and the date you sell it, the amount of perceived “profit” will be large – at least in the eyes of HMRC – which will in turn increase the amount of Capital Gains Tax to be paid
- The sooner you sell the property, the fewer expenses you are likely to incur regarding its management and maintenance
- If you are unable to maintain the property yourself, it may begin to decrease in value as it falls into disrepair, making it harder to sell and meaning you will receive less from any eventual sale
- The management of an additional property may cause you needless stress and hassle – and this will only get worse the longer it remains in your possession
So: Can You Sell a House That Has Been Gifted to You?
Absolutely. If the property has been transferred into your hands by way of an official Deed of Gift or Transfer by Way of Gift – or via probate – it is entirely up to you to decide what to do next.
Of course, not all property sells easily. If you have received a house via Deed of Gift or similar, it may not be in the best state of repair or in the most desirable location. Indeed, it may have any number of detrimental aspects that could make a sale difficult to secure.
If this is the case, it may well be worth getting in touch with a fast home buying company. Organisations of this kind will usually buy property in any condition, even if it has sitting tenants or is a mixed-use building.
Sales of this kind can be very speedy – usually taking between 7 and 30 days to complete. The seller of the property will receive between 75 and 85% of the home’s fair market value.
Solicitor fees and agency fees will usually be covered too, preventing any additional hassle.
Any Questions?
If you’d like to learn more about selling your property quickly, simply get in touch with us today. We can provide you with a free valuation and an upfront cash offer to get the process started.
