Selling Your House to a Family Member: The 2026 UK Guide

By Lisa Hayes · 11 November 2026

Yes, you can sell your house to a family member in the UK, and you can sell it for less than it's worth. But the moment the price drops below market value, the discount becomes a gift in the eyes of HMRC, and that one fact drives everything else: Capital Gains Tax is worked out on full market value, the gift sits in your estate for Inheritance Tax for seven years, and your relative's mortgage lender, stamp duty bill and solicitor all need to know exactly what's going on.

Done properly, a family sale is one of the cheapest, calmest ways to move a home on. Done on a handshake, it can produce a tax bill on money you never received, a buyer who can't get a mortgage, and a family row that lasts longer than the house does. Here's how to get it right.

Can you legally sell your house to a family member?

Yes. There's no law in England, Wales, Scotland or Northern Ireland that stops you selling to a relative, and no law that says you must charge the full market price. It's your property; you can sell it for whatever you like, or give it away entirely.

What the law does do is look through the price. Tax, insolvency and care-funding rules all have ways of treating an undervalue sale as part-sale, part-gift. So the useful question isn't "am I allowed?" but "what does the discount trigger?" The rest of this guide answers that, piece by piece.

The mechanics of the sale itself are the same as any other: contracts drafted and exchanged, a TR1 transfer deed signed, the buyer's solicitor registering the change at HM Land Registry, and Stamp Duty Land Tax filed within 14 days of completion if the buyer is in England or Northern Ireland (Land Transaction Tax in Wales, LBTT in Scotland).

Who counts as a "family member" for tax purposes?

This matters more than people expect, because the tax rules don't use the everyday meaning of family. For Capital Gains Tax, section 286 of the Taxation of Chargeable Gains Act 1992 defines who is "connected" with you. For an individual, that's:

• your spouse or civil partner;
• your relatives, meaning brothers, sisters, parents, grandparents and other ancestors, and children, grandchildren and other lineal descendants;
• the spouses or civil partners of any of those relatives;
• your spouse's or civil partner's relatives, and their spouses or civil partners.

Notice who isn't on the list: nephews, nieces, aunts, uncles and cousins. An unmarried partner isn't connected either. That doesn't give you a free pass, though. If you knowingly sell to a niece at a big discount, HMRC can still argue the deal "wasn't at arm's length" and substitute market value under section 17 of the same Act. In practice, treat any sale to someone you love at a below-market price as a connected-person sale and you won't go far wrong.

Spouses and civil partners who live together are a special case: transfers between them happen at "no gain, no loss" for CGT and are exempt from Inheritance Tax (assuming both are UK domiciled or long-term resident). Selling to your husband or wife is really a different topic; this guide is about children, parents, siblings and the wider family.

How does Capital Gains Tax work when you sell to a relative?

Section 18 of the Taxation of Chargeable Gains Act 1992 is the rule that catches people out. When you dispose of an asset to a connected person, the transaction is treated as "otherwise than by way of a bargain made at arm's length", and HMRC replaces the price you received with the asset's market value.

So if the house is worth £300,000 and you sell it to your son for £200,000, your gain is calculated as if you'd received £300,000.

When does none of this matter?

If the property has been your only or main home for the whole time you've owned it, Private Residence Relief normally removes any gain, at market value or otherwise. Most people selling the family home to a child pay no CGT at all. The final nine months of ownership also qualify for relief even if you've already moved out, which helps if you've gone into a new home first. Our guide to Capital Gains Tax when you sell your home covers the edge cases: large gardens, periods of letting, and time spent working away.

When does it bite?

Buy-to-lets, second homes, inherited houses that you never lived in, and homes you moved out of years ago. Here's what it looks like with a rental you bought for £120,000:

The figures ignore buying and selling costs and capital improvements, which you can deduct, but the point stands: you'd owe more than £42,000 of tax having received only £80,000 more than you paid. Residential property gains are taxed at 18% within the basic-rate band and 24% above it, and a UK resident must report and pay any tax due on a UK residential property disposal within 60 days of completion through HMRC's online Capital Gains Tax on UK property service.

Is selling below market value a gift for Inheritance Tax?

Yes. The difference between market value and the price paid is a transfer of value, usually called a gift of equity. Sell a £300,000 house to your daughter for £200,000 and you've made a £100,000 gift.

For most family gifts that's a potentially exempt transfer. Survive seven years from the date of completion and it drops out of your estate completely. Die within seven years and the gift is added back when your estate is valued for Inheritance Tax.

How the seven-year rule and taper relief actually work

Failed gifts use up your nil-rate band first. The nil-rate band is £325,000 and the residence nil-rate band is £175,000, both frozen until April 2031 following the November 2025 Budget. Only if the gifts made in the seven years before death exceed the available nil-rate band is tax due on the gift itself, and that tax can be reduced by taper relief:

A common misunderstanding: taper relief doesn't shrink the gift, it shrinks the tax on it. If your £100,000 gift fits inside the nil-rate band, taper relief does nothing, because there was no tax on the gift to reduce. What happens instead is that the gift eats into the band that would otherwise have protected the rest of your estate. That's why the gift's date and value must be recorded clearly; your executors will need them. Your £3,000 annual gift exemption (plus last year's, if unused) can be knocked off the value too.

For more on thresholds and how they interact with the family home, see our Inheritance Tax threshold guide.

Can you sell to your children and keep living in the house?

You can, but if you're getting a discount on the price and carrying on living there rent-free, you've walked straight into the gift with reservation of benefit rules in section 102 of the Finance Act 1986. HMRC treats the gifted share as still being in your estate when you die, no matter how many years pass. The seven-year clock never starts.

The way out is to pay your relative a full market rent, on proper terms, and keep paying it. That rent is taxable income in their hands. It's a legitimate arrangement and plenty of families use it, but it has to be real: a tenancy agreement, rent actually changing hands, reviewed periodically.

There's also the property itself to think about. If your child takes a mortgage to buy, their lender will want to know who lives there. Many residential lenders won't lend if a parent is staying on as an occupier, and a buy-to-let lender will want a formal tenancy. If you're really looking at selling up while staying put, read can you sell your house and rent it back first, because commercial sale-and-rent-back is a very different (and FCA-regulated) animal.

How much stamp duty does the family member pay?

Stamp Duty Land Tax is paid by the buyer, on the chargeable consideration: broadly, the money they pay plus any mortgage debt they take over. The gifted equity isn't consideration, so it isn't taxed. Market value is irrelevant here (unlike CGT).

Using our £300,000 house sold for £200,000, in England from 1 April 2025 rates:

First-time buyer relief applies at 0% up to £300,000 and 5% on the slice up to £500,000, but disappears completely if the price is over £500,000. The higher-rates surcharge has been 5 percentage points since 31 October 2024. Wales and Scotland run their own taxes with different bands, so ask the buyer's solicitor to run the numbers.

One trap worth naming: if your relative takes over a share of your existing mortgage rather than paying you, the debt they assume counts as consideration. A "gift" of a house with a £150,000 mortgage on it, where the buyer takes on the loan, is a £150,000 purchase for SDLT.

Will a mortgage lender accept a family purchase?

Most will, but they have a vocabulary for it and you need to use it. Lenders call this a concessionary purchase or a purchase with a gifted deposit (gift of equity). Instead of the buyer putting cash down, the discount itself is treated as their deposit.

So in our example, your daughter borrows £200,000 against a house valued at £300,000: a loan-to-value of about 67%, which can unlock noticeably better rates than she'd get with a 5% or 10% deposit elsewhere. That's often the single biggest financial benefit of the whole arrangement.

What lenders typically want to see:

• their own valuation confirming market value, because they'll lend against the lower of price and valuation in some cases and against valuation in others;
• a signed gifted equity letter from you confirming the discount is a gift, not a loan, and that you have no ongoing interest in the property;
• evidence of the family relationship;
• confirmation of who will live there (and that you won't, unless the product allows it).

Criteria vary. Some lenders only accept gifted equity from parents or grandparents; some cap how much of the deposit can come this way; a few won't touch it. A whole-of-market mortgage broker will know which lenders like these deals. Tell the broker at the very start that it's a family sale: hiding it will come out in the valuation or the conveyancing anyway, and it's the kind of thing that gets a mortgage offer withdrawn late in the day.

Do you need a valuation to sell to family?

You need one for several reasons at once: HMRC needs a market value for CGT, your executors need one for Inheritance Tax, the lender needs one, and frankly you need one so that everyone in the family can see the discount is what you think it is.

A free online estimate or a chat with a local agent is a starting point, and our how much is my house worth guide shows you how to sense-check one. But for a family sale with a meaningful gift element, I'd get a written valuation from a RICS Registered Valuer. Date it close to completion. If HMRC ever questions the figure, a contemporaneous professional valuation is far stronger than a portal estimate printed out years later. You can also ask HMRC to check a valuation used in a CGT computation, after the disposal, using form CG34.

Want a quick, no-obligation starting point first? Our free house valuation will give you a realistic range.

Can the same solicitor act for both sides?

Sometimes, technically. Should they? In my view, no.

The Solicitors Regulation Authority's Code of Conduct only lets a firm act for both buyer and seller where there's no conflict, or within narrow exceptions with both parties' informed consent. Many firms simply refuse family transactions on both sides, and plenty of lenders won't instruct a firm that's also acting for the seller. Even where it's allowed, it leaves no-one whose job is purely to protect you.

And there is plenty to protect. Separate solicitors will ask the awkward questions: what happens if your son divorces in three years (should the gift be documented, or protected by a declaration of trust)? Is anyone else living in the property who needs to sign a consent? Is the gift letter consistent with what you've told your other children? The cost of a second solicitor is small next to the cost of getting any of that wrong.

What could go wrong with an undervalue family sale?

Beyond tax, three sets of rules can unpick or penalise a below-value sale. None is common, but all are serious when they apply.

Bankruptcy and creditors

Under section 339 of the Insolvency Act 1986, if you're made bankrupt within five years of a "transaction at an undervalue", the trustee in bankruptcy can apply to court to reverse it. Within two years, they don't even need to show you were insolvent at the time. Section 423 goes further: if the purpose was to put assets beyond creditors' reach, there's no time limit at all. If you have significant debts, read our guide to selling while bankrupt and take advice before you discount anything. If you're behind on the mortgage, a family sale can be a lifeline, but only at a defensible price.

Care fees and deprivation of assets

If you later need council-funded care, the local authority can treat you as still owning assets you deliberately gave away to avoid care costs. This is "deprivation of assets" under the Care and Support Statutory Guidance, and unlike Inheritance Tax there's no seven-year safe harbour; councils look at your motive and what you could reasonably foresee at the time. Selling the family home cheaply to a child shortly before needing care is exactly the pattern they look for. More on this in do I have to sell my house to pay for care fees.

Means-tested benefits

The same deprivation principle applies to Universal Credit, Pension Credit and other means-tested benefits. If you're claiming, or might soon, the "notional capital" rules can treat the gifted equity as money you still have.

What about fairness to your other children?

This is the part no tax table covers, and it causes more trouble than HMRC ever does.

A £100,000 discount to one child is a £100,000 head start the others didn't get. If that's what you intend, fine, but write it down. If it isn't, there are clean ways to even things up: an equalising clause in your will, a lifetime cash gift to the others, or recording the discount as an advance on inheritance. A will made after the sale that says nothing about it is an invitation to a dispute, and contested estates are miserable. (We see what happens next in inherited property sales more often than we'd like.)

Tell everyone. Before exchange, not after.

Selling to family vs selling on the open market: which is better?

My honest view: if the property is your main home, the family member can genuinely afford the mortgage, and the rest of the family is on board, a family sale is often the best deal anyone involved will ever get. If it's a rental with a big gain, or you need every pound of equity, an open-market sale and a separate cash gift may be cleaner. Run both sets of numbers.

How do you sell a house to a family member? Step by step

• Step 1: Agree the principle as a family. Who's buying, at what price, who lives where afterwards, and how other relatives are treated.
• Step 2: Get a written valuation from a RICS Registered Valuer. This fixes the gift figure for every purpose that follows.
• Step 3: Take tax advice if it isn't your main home, or if you may need care or have debts. Model CGT at market value and the IHT exposure.
• Step 4: Buyer speaks to a mortgage broker and flags a concessionary purchase with gifted equity up front.
• Step 5: Instruct separate solicitors. Tell both firms it's a family sale at an undervalue.
• Step 6: Sign the gifted equity letter the lender asks for, and keep a copy with your will papers.
• Step 7: Conveyancing as normal: draft contract, property information forms (TA6, TA10), searches, mortgage offer, exchange.
• Step 8: Complete. The buyer's solicitor pays SDLT within 14 days and registers the TR1 at HM Land Registry.
• Step 9: Report any CGT within 60 days of completion if tax is due.
• Step 10: Update your will and record the gift (date, value, valuation report) so your executors can find it.

Because there's no agent and no onward chain from strangers, a family sale often moves faster than an open-market one, with the timetable mostly set by searches and the lender. With no mortgage at all, it can be quicker still.

Can you just give the house away instead?

You can transfer a house as an outright gift for nothing. The buyer pays no SDLT if there's no mortgage taken over, and the IHT position is the same as for a gift of equity, just with a bigger number. CGT is still worked out on market value for a connected person, so a gifted rental can still produce a tax bill with no cash to pay it from. Holdover relief, which defers the gain, generally isn't available for residential property gifted to individuals, only for business assets or transfers into certain trusts.

The bigger practical problem is that if your relative needs a mortgage to raise money against the house later, or wants to sell it on, having bought it for £0 or £1 can make lenders nervous. A sale at a stated price with a documented gift of equity is usually cleaner. Selling for £1 is legal but buys you nothing a plain gift doesn't.

What if the family member is already your tenant?

Selling a buy-to-let to the relative who's renting it is common and sensible: no voids, no eviction, a buyer who knows every creak in the floorboards. The CGT market-value rule still applies, and the tenancy ends on completion because your tenant becomes the owner. The lender will treat it as a residential purchase. If it's an unrelated tenant you want to sell to, or a sale with tenants in situ to an investor, our tenanted property guide covers that route.

When a family sale isn't the right answer

Sometimes the plan falls apart: the relative can't get a mortgage, the CGT numbers are ugly, or the family can't agree. That's not a failure. It's information. You still have every normal route open: a traditional agent, an auction, or, if speed matters more than squeezing out the last pound, a cash buyer. If you go that way, be choosy; our guide to cash house buyers explains what fair offers look like and which firms to avoid.

The bottom line

Selling your home to a family member is legal, common and often brilliant value for everyone. Just treat it as two transactions in one: a sale at the price paid, and a gift of the difference. Price the gift with a proper valuation, tell the lender, use separate solicitors, check the CGT if it isn't your main home, and put the gift in writing for your executors and your other children.

And if you'd like to see what the open market would pay before you decide how generous to be, you can compare offers with Ready Steady Sell. It's free, and it gives you a real number to start the family conversation with.