Selling part of your house to a family member UK

Selling a part of your house to a family member in the UK can be a complex transaction involving legal, financial, and tax considerations. This comprehensive guide aims to cover the key aspects of such a transaction, including legal frameworks, tax implications, valuation, and practical steps to ensure a smooth process.

Understanding the Legal Framework

Property Ownership Structures

Before selling part of your house, it is important to understand the different property ownership structures in the UK:

  1. Freehold: Owning the property and the land it stands on outright.
  2. Leasehold: Owning the property for a set period (lease term) but not the land.
  3. Joint Ownership: Property owned by two or more people. This can be either:
    • Joint Tenants: Each owner has an equal share, and the property passes automatically to the other owners upon death.
    • Tenants in Common: Each owner has a specific share, which can be passed on to someone else in their will.

Selling a part of your house involves either transferring a share of the freehold or leasehold interest or creating a new shared ownership arrangement.

Legal Considerations

  1. Title Deeds: Ensure the title deeds reflect the change in ownership. This may involve registering the transfer with the Land Registry.
  2. Sale Agreement: Draft a sale agreement outlining the terms of the sale, including the portion being sold, price, and any conditions.
  3. Mortgage Lender Approval: If there is an existing mortgage on the property, obtain consent from your mortgage lender. They may need to approve the new ownership structure.
  4. Legal Advice: Both parties should seek independent legal advice to ensure their interests are protected.

Tax Implications

Capital Gains Tax (CGT)

Selling part of your house may trigger a Capital Gains Tax liability. The amount of CGT depends on several factors:

  1. Primary Residence Relief: If the property is your main residence, you may be eligible for Private Residence Relief, which can significantly reduce or eliminate CGT.
  2. Proportion of Sale: CGT is calculated on the proportion of the property being sold.
  3. Calculation: The gain is the difference between the sale proceeds and the base cost (original purchase price plus any allowable improvements).
  • Original Purchase Price: £200,000
  • Portion Sold: 50%
  • Sale Proceeds: £150,000
  • Base Cost for Portion Sold: £200,000 x 50% = £100,000
  • Gain: £150,000 – £100,000 = £50,000

If eligible, Private Residence Relief can be applied to reduce this gain.

Stamp Duty Land Tax (SDLT)

The purchaser may be liable for SDLT on their purchase. SDLT is calculated based on the purchase price and the value of the interest being transferred.

Inheritance Tax (IHT)

Transferring property to a family member could have IHT implications if the seller passes away within seven years of the transfer. This is considered a Potentially Exempt Transfer (PET).

Gift Tax

If the transaction is structured as a gift (selling below market value), it may still be subject to CGT and could affect IHT calculations.


Obtaining an accurate valuation is crucial for tax and legal purposes. Consider the following steps:

  1. Professional Valuation: Hire a chartered surveyor or professional valuer to assess the property’s market value.
  2. Comparable Sales: Research recent sales of similar properties in the area to determine a fair market value.
  3. Condition and Improvements: Consider the condition of the property and any improvements made, as these will affect the value.

Practical Steps

1. Discuss the Transaction

Start by discussing the proposed sale with the family member to agree on key terms such as the portion being sold, price, and any conditions.

2. Obtain Professional Advice

Both parties should seek independent legal and financial advice. Engaging a solicitor and a financial advisor can help navigate the complexities of the transaction.

3. Arrange a Valuation

Get the property professionally valued to ensure a fair price is agreed upon and for tax purposes.

4. Draft a Sale Agreement

The sale agreement should outline the terms of the sale, including:

  • The portion of the property being sold
  • The agreed sale price
  • Any conditions or terms
  • Responsibilities for ongoing property costs

5. Obtain Mortgage Lender Approval

If there is an existing mortgage, inform your lender and obtain their approval. They may need to reassess the mortgage terms based on the new ownership structure.

6. Complete the Sale

The sale process involves several legal steps:

  1. Transfer Deed: A legal document transferring ownership from the seller to the buyer.
  2. Land Registry: Register the transfer with the Land Registry to update the ownership details.
  3. Mortgage Documentation: If applicable, update mortgage documentation to reflect the new ownership.

Specific Scenarios and Considerations

Selling to a Child

Selling part of your house to a child involves specific considerations:

  1. Market Value and Discounts: Decide whether to sell at market value or offer a discount. Selling at below market value may have tax implications.
  2. Financial Assistance: If providing financial assistance (e.g., a loan or gift), document the terms clearly to avoid future disputes.

Selling to a Sibling

When selling to a sibling, consider:

  1. Shared Ownership Arrangements: Decide whether to hold the property as joint tenants or tenants in common.
  2. Future Use and Management: Agree on how the property will be used and managed, including maintenance costs and responsibilities.

Selling to a Parent

If selling to a parent, think about:

  1. Living Arrangements: Discuss living arrangements if either party intends to continue residing in the property.
  2. Inheritance Considerations: Consider the impact on inheritance planning and potential IHT implications.

Financial Implications

Impact on Benefits and Entitlements

Selling part of your house may affect your eligibility for certain benefits or entitlements, such as:

  1. Means-Tested Benefits: The proceeds from the sale could affect means-tested benefits like Universal Credit or Pension Credit.
  2. Council Tax: The change in ownership may impact council tax liability or entitlements to discounts.

Investment and Use of Proceeds

Consider how the proceeds from the sale will be used or invested:

  1. Reinvestment in Property: You might choose to reinvest the proceeds into another property or home improvements.
  2. Savings and Investments: Alternatively, the proceeds could be placed into savings or investment accounts, affecting income and tax liabilities.

Potential Challenges and Solutions

Disputes and Conflicts

Family transactions can sometimes lead to disputes. To mitigate this risk:

  1. Clear Communication: Maintain open and clear communication throughout the process.
  2. Document Agreements: Document all agreements formally to avoid misunderstandings.
  3. Independent Advice: Ensure both parties seek independent advice to protect their interests.

Legal and Tax Compliance

Ensure compliance with all legal and tax obligations:

  1. Hire Professionals: Engage solicitors, accountants, and surveyors to manage the legal and financial aspects.
  2. Stay Informed: Keep abreast of changes in property and tax laws that may affect the transaction.

Case Study: Practical Application

Let’s consider a detailed case study to illustrate the process of selling part of a house to a family member:


Jane owns a house valued at £400,000. She decides to sell 50% of the property to her son, David, for £200,000.

Steps Taken:

  1. Discussion: Jane and David discuss and agree on the sale terms, including the price and share of ownership.
  2. Professional Advice: Both seek independent legal and financial advice.
  3. Valuation: A chartered surveyor values the property at £400,000, confirming the agreed sale price is fair.
  4. Sale Agreement: A sale agreement is drafted, outlining the terms and conditions of the sale.
  5. Mortgage Lender Approval: Jane’s mortgage lender is informed, and approval is obtained for the new ownership structure.
  6. Legal Process: The transfer deed is prepared, and the transfer is registered with the Land Registry.
  7. Tax Compliance: Jane calculates her CGT liability. The gain on the sale is:
    • Portion Sold: 50%
    • Sale Proceeds: £200,000
    • Base Cost for Portion Sold: £400,000 x 50% = £200,000
    • Gain: £200,000 – £200,000 = £0 (No CGT due as there is no gain).
  8. Completion: The sale is completed, and David becomes the owner of 50% of the property.


Selling part of your house to a family member in the UK involves careful planning and consideration of various legal, financial, and tax implications. By following a structured approach, seeking professional advice, and ensuring clear communication, you can navigate the complexities of such a transaction and achieve a successful outcome.

Key Takeaways:

  1. Understand Ownership Structures: Be clear on whether you are dealing with freehold, leasehold, joint tenancy, or tenants in common.
  2. Consider Tax Implications: Be aware of potential CGT, SDLT, and IHT implications, and take steps to minimize liabilities.
  3. Seek Professional Advice: Engage solicitors, surveyors, and financial advisors to guide you through the process.
  4. Document Everything: Ensure all agreements and transactions are properly documented to avoid future disputes.
  5. Plan for the Future: Consider the long-term implications

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