Can I sell my house to my son and still live in it? A Comprehensive Guide for UK Homeowners

Selling a house to a family member, such as your son, while continuing to live in it can be a viable option for homeowners in the UK. This arrangement can have various motivations, such as financial planning, tax benefits, or simply keeping the home within the family. However, it is crucial to understand the legal, financial, and tax implications of such a transaction to ensure that it is executed correctly and beneficially. This comprehensive guide will explore the details of selling your house to your son and continuing to live in it, covering the process, potential challenges, and legal and financial considerations.

Overview of Selling Your House to Your Son

When you sell your house to your son but plan to continue living in it, you are essentially entering into a “sale and retain” arrangement. This can be structured in several ways, such as a straightforward sale with the expectation of continued residence or through more complex legal arrangements like a “lifetime tenancy” or “residential leaseback” agreement.

Key Considerations Before Selling Your House to Your Son

Before proceeding with the sale, you should consider several factors:

  1. Motivation and Goals:
    • Financial Planning: You might be looking to transfer the asset to your son while accessing some immediate funds.
    • Inheritance Planning: Selling the house can be part of a broader estate planning strategy.
    • Tax Efficiency: The sale could be structured to optimize tax liabilities.
  2. Legal and Financial Implications:
    • Market Value of the Property: Determining a fair market value is crucial for legal and financial reasons.
    • Tax Implications: Understanding capital gains tax, inheritance tax, and potential stamp duty liabilities.
    • Legal Agreements: Drafting legal agreements to formalize your right to live in the property.

The Process of Selling Your House to Your Son

The process of selling your house to your son involves several steps, which are outlined below:

1. Valuation of the Property

Before selling your house, you should have it valued to determine its market price. This valuation can be conducted by a certified estate agent or property surveyor.

  • Why Valuation is Important:
    • Fair Price: Ensures that the sale price reflects the current market value.
    • Tax Purposes: Accurate valuations are important for tax calculations.
  • How to Get a Valuation:
    • Estate Agents: Obtain quotes from local estate agents.
    • Surveyors: Hire a chartered surveyor for a professional valuation.

2. Legal Advice and Drafting Agreements

Consulting with a solicitor who specializes in property law is essential. They can help draft the legal documents required for the sale and any additional agreements to allow you to stay in the house.

  • Legal Agreements:
    • Sale Agreement: The document that transfers ownership of the property.
    • Tenancy Agreement: A formal agreement if you will remain in the property as a tenant.

3. Completing the Sale

The sale process involves several legal and administrative tasks:

  • Offer and Acceptance:
    • Your son will make an offer based on the property valuation, which you can accept or negotiate.
  • Conveyancing:
    • This is the legal process of transferring property ownership from you to your son. Your solicitor will handle this process, which includes conducting searches, preparing legal documents, and liaising with the buyer’s solicitor.
  • Completion:
    • On the completion date, the sale is finalized, and ownership is transferred to your son. You will receive the sale proceeds, and your son will officially own the property.

Continuing to Live in the Property

Once the sale is complete, you will need to establish a formal agreement that allows you to continue living in the property. There are several options for this arrangement:

1. Lifetime Tenancy

A lifetime tenancy agreement allows you to live in the property for the rest of your life.

  • Advantages:
    • Security: You have the right to live in the property for your lifetime.
    • Legal Protection: This arrangement is legally binding.
  • Disadvantages:
    • Impact on Inheritance: A lifetime tenancy might affect your son’s ability to sell or refinance the property.

2. Residential Leaseback Agreement

In a leaseback arrangement, you sell the property to your son and lease it back from him.

  • Advantages:
    • Flexibility: You can negotiate the terms of the lease, such as the duration and rent.
    • Financial Management: Allows you to access the sale proceeds while still living in the property.
  • Disadvantages:
    • Rent Obligations: You will need to pay rent to your son under the terms of the lease.

3. Informal Arrangement

You may have an informal arrangement with your son, where there is a verbal agreement that you will continue to live in the property.

  • Advantages:
    • Simplicity: Less formal paperwork and legal processes.
  • Disadvantages:
    • Lack of Legal Protection: No formal legal recourse if disagreements arise.

Legal and Financial Implications

Selling your house to your son and continuing to live in it has several legal and financial implications that you need to be aware of:

1. Capital Gains Tax

If you are selling the property, you might be liable for capital gains tax on any profit made from the sale.

  • Exemptions:
    • Private Residence Relief: If the house has been your main home throughout the period of ownership, you may be eligible for this relief.
    • Annual Exemption: There is an annual tax-free allowance for capital gains, which can be deducted from the gains.

2. Inheritance Tax

Transferring the property to your son might have implications for inheritance tax.

  • Potential Implications:
    • Gifts: If the sale price is below market value, the difference might be considered a gift and could be subject to inheritance tax.
    • Gifts with Reservation of Benefit: If you continue to live in the property rent-free or at a reduced rent, this could be considered a gift with reservation of benefit, which may impact inheritance tax calculations.

3. Stamp Duty Land Tax (SDLT)

Your son will be liable for stamp duty on the purchase of the property.

  • Rates:
    • Residential Property Rates: Stamp duty rates vary depending on the purchase price of the property.
    • First-Time Buyers: There are exemptions and reductions available for first-time buyers.

4. Legal Fees

Both you and your son will incur legal fees during the sale process.

  • Costs Include:
    • Solicitor Fees: For drafting and reviewing legal documents.
    • Conveyancing Fees: For the legal transfer of ownership.

Case Studies and Examples

To illustrate the various aspects of selling a house to your son and continuing to live in it, consider the following hypothetical case studies:

Case Study 1: Lifetime Tenancy Agreement

Background: John is 70 years old and wants to sell his house to his son, Tom, while continuing to live there. They agree on a lifetime tenancy arrangement.


  • Valuation: John’s house is valued at £300,000.
  • Sale: John sells the house to Tom for £300,000.
  • Agreement: They draft a lifetime tenancy agreement, allowing John to live in the house for as long as he wishes.
  • Tax Implications: John qualifies for Private Residence Relief, so there is no capital gains tax on the sale. Tom pays stamp duty on the full purchase price.

Outcome: John receives the sale proceeds, continues living in the house, and Tom benefits from the property’s future value.

Case Study 2: Residential Leaseback

Background: Sarah, a 65-year-old homeowner, sells her house to her son, James, and agrees to a residential leaseback arrangement.


  • Valuation: Sarah’s house is valued at £250,000.
  • Sale: Sarah sells the house to James for £250,000.
  • Lease: They agree on a leaseback arrangement with a £1,000 monthly rent for a period of 5 years.

Tax Implications:

  • Capital Gains Tax: Sarah is exempt due to Private Residence Relief.
  • Stamp Duty: James pays stamp duty on the £250,000 purchase price.
  • Lease: Sarah pays rent, and the terms are outlined in the lease agreement.

Outcome: Sarah has cash from the sale and a fixed-term agreement to stay in the house, while James benefits from rental income.

Case Study 3: Informal Arrangement

Background: Alice, 60, sells her house to her son, Daniel, and relies on an informal verbal agreement to continue living in the property.


  • Valuation: Alice’s house is valued at £200,000.
  • Sale: Alice sells the house to Daniel for £200,000.
  • Agreement: They have a verbal agreement that Alice can live in the house.

Tax Implications:

  • Capital Gains Tax: Alice is exempt from capital gains tax due to Private Residence Relief.
  • Stamp Duty: Daniel pays stamp duty on the purchase price.
  • Legal Risks: There are no formal agreements, which could lead to disputes.

Outcome: Alice has cash from the sale and continues living in the house, but


the lack of a formal agreement could pose future risks.

Tips for a Successful Transaction

To ensure a smooth and beneficial transaction, consider the following tips:

  1. Consult Professionals:
    • Solicitors: For legal advice and drafting agreements.
    • Financial Advisors: To understand the tax implications and financial benefits.
  2. Formalize Agreements:
    • Always have a formal, legally binding agreement to outline the terms of your continued residence.
  3. Understand Tax Implications:
    • Be fully aware of any potential tax liabilities, including capital gains, inheritance tax, and stamp duty.
  4. Consider Future Implications:
    • Think about how the sale will impact your future financial situation and your son’s ownership of the property.
  5. Maintain Clear Communication:
    • Ensure that all parties involved fully understand the terms and implications of the transaction.


Selling your house to your son while continuing to live in it can be a practical and beneficial arrangement when done correctly. It is essential to understand the legal, financial, and tax implications involved and to consult with professionals to ensure that the transaction is executed smoothly. By following the appropriate steps and considering all factors, you can achieve a successful sale and retain the comfort and familiarity of your home.

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