Gifting a Rental Property to Your Children: The Tax Rules
Last updated 29 June 2026 · 9 min read · By the LandlordTaxAi Editorial Team
The short answer
Giving a buy-to-let to your children is not tax-free. It’s a disposal for Capital Gains Tax at market value (18%/24% after the £3,000 allowance), it starts a 7-year inheritance tax clock, and if you keep the rent it’s a gift with reservation of benefit that stays in your estate anyway. There’s no main-residence relief on a property you’ve only ever let.
Passing a rental property to the next generation is one of the most-asked landlord questions — and one of the easiest to get expensively wrong. Because your children are connected persons, you can’t simply “sell it to them for £1” to dodge the tax: HMRC substitutes the open-market value.
This guide walks through all three taxes that can bite — CGT, inheritance tax and SDLT — with a worked example. For selling at an undervalue rather than an outright gift, see selling property below market value to family.
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CGT on Gifting Calculator 2026/27
Estimate the Capital Gains Tax on giving a rental away — based on its market value at the gift date.
Result
- Total gain
- £66,000
- Less annual exempt amount
- − £3,000
- Taxable gain
- £63,000
- CGT at 24%
- £15,120
- Net proceeds after CGT
- £50,880
Residential rates 18%/24%, £3,000 allowance, 60-day reporting. Use market value as the 'sale price'. Estimate only.
1. Capital Gains Tax — at market value
For CGT, a gift is treated as a disposal. Because your children are connected persons, the gain is worked out as if you had sold the property at its market value on the day you gave it — the price you actually receive (even £0) is ignored.
You deduct what you originally paid (plus buying/selling costs and qualifying improvements) and the £3,000 annual exempt amount, then pay 18% (basic-rate band) and/or 24% (higher) on a residential property. If the property has never been your main home, you get no private residence relief. The CGT must be reported and paid within 60 days.
The sting: you may owe a large CGT bill in cash even though you received no money from the gift. Plan for how it will be funded.
2. Inheritance tax — the 7-year rule
A gift to your children is a potentially exempt transfer (PET). If you survive seven years from the date of the gift, its value falls completely out of your estate for inheritance tax. Die within seven years and it’s added back.
Taper relief can reduce the tax on gifts made between three and seven years before death — but note it only reduces tax actually due, which is generally only where the gift exceeds the nil-rate band (£325,000).
3. The gift-with-reservation trap
This is where landlords get caught. If you give the property away but keep a benefit from it — most obviously, you carry on receiving the rent — it’s a gift with reservation of benefit. The seven-year clock doesn’t help: HMRC treats the property as still in your estate for inheritance tax.
To make the gift effective for IHT, you must genuinely give up the income and control. That means the rent (and the responsibility) really passes to your children.
4. Stamp Duty Land Tax
A pure gift with no payment and no mortgage taken over usually has no SDLT. But if your children take on the outstanding mortgage, that debt counts as consideration — and SDLT (potentially with the 5% additional-property surcharge) can be due on it.
Know your gain before you gift
LandlordTaxAi keeps a clean record of what you paid, your costs and improvements — the numbers you need to work out CGT accurately before transferring a property.
See how it worksA worked example
David gives a buy-to-let to his daughter. He bought it for £180,000; it’s now worth £300,000. He’s a higher-rate taxpayer and keeps no benefit.
| Market value at gift | £300,000 |
| Less original cost | £180,000 |
| Gain | £120,000 |
| Less £3,000 allowance | £117,000 taxable |
| CGT at 24% | £28,080 (due in 60 days) |
| IHT | £0 if David survives 7 years |
David pays £28,080 of CGT now — from his own pocket, since he received nothing — and the property leaves his estate for IHT only if he lives another seven years and takes no further benefit.
Frequently asked questions
Do I pay CGT if I give a rental away?
Usually yes. It’s a disposal calculated at market value. With no main-residence history, the gain is taxed at 18%/24% after the £3,000 allowance.
Does gifting avoid inheritance tax?
Only if you survive seven years and truly give up benefit. It’s a PET; survive seven years and it leaves your estate, with taper relief possibly reducing tax if you die sooner.
What is the gift-with-reservation trap?
If you keep a benefit — such as continuing to receive the rent — HMRC treats the property as still in your estate, so the 7-year clock doesn’t help.
Is there Stamp Duty on a gift?
With no payment and no mortgage taken over, usually none. But if your children assume the mortgage, that counts as consideration and SDLT can apply.
When do I report and pay the CGT?
Within 60 days of completion, using HMRC’s online UK property service.
What value do my children use if they sell later?
Their base cost is the market value at the gift date; growth after that is their own gain when they sell.
Written and reviewed by the LandlordTaxAi Editorial Team. Our guides are reviewed against current HMRC guidance and updated when the rules change. Operated by LandlordTaxAi, United Kingdom. Follow us on LinkedIn.
Last reviewed: 29 June 2026 · Researched against primary UK sources for the 2026/27 tax year: https://www.litrg.org.uk/savings-property/capital-gains-tax/capital-gains-tax-gifts; https://www.gov.uk/inheritance-tax/gifts; https://www.gov.uk/capital-gains-tax/market-value. This article is informational only and is not a substitute for advice on a transaction of this size — speak to a qualified accountant or solicitor.