Wembley Overview
Mortgage rates have fallen following August’s bank rate cut. The average two-year fixed rate is now 4.25%, down from 4.99% a year ago, while the five-year fixed rate is 4.18%, down from 4.49%.
Looking ahead, the Bank of England expects inflation to peak at 4% in September before easing back to its 2% target in 2027. While mortgage rates are following the influence of the Bank’s rate cuts, they are unlikely to fall significantly.
The property market is often said to slow in summer, as holidays, school breaks, and seasonal distractions take priority over buying and selling.
Swap rates, which influence fixed-rate mortgage pricing, dipped ahead of the August meeting amid expectations of further rate cuts. This has intensified competition in the mortgage market, with rates now as low as 3.7%.
The Risks of Gifting Property
Gifting your property to children or grandchildren is not only a lovely gesture — it can also make financial sense. However, there are some important risks to be aware of.
In this article, we’ll look at some of the potential pitfalls of gifting property to help you decide if it’s the right choice for you and your family.
Can I Gift My Property to My Family Members?
Yes, you can gift your property to a loved one instead of selling it or leaving it in your will. Whether it’s your children, other family members, or even close friends, this generous act is usually completed through a Deed of Gift.
Tax Considerations
When you gift a property to a loved one, the amount of tax payable will depend on your circumstances and the person receiving the gift. Before making any decisions, it’s important to understand how the following tax implications might affect you:
Inheritance Tax (IHT)
Even if you gift your home rather than leaving it in your will, it could still be subject to Inheritance Tax when you pass away.
If the person gifting the property lives for seven years following the gift, the home will no longer be considered part of the estate and therefore won’t be subject to IHT.
Until seven years have passed, the gift will be treated as a Potentially Exempt Transfer (PET).
The value of the property gifted within this period will be added back to the giver’s estate for IHT purposes, potentially increasing the overall liability.
Income Tax
Income Tax implications can arise if the gifted property generates income, such as rental income.
The recipient may be liable for Income Tax on any rental income received, calculated based on their income tax band.
Capital Gains Tax (CGT)
CGT may apply when the gifted property is eventually sold by the recipient.
The liability is based on the increase in the property’s value from the date it was originally purchased by the giver, not from the date of the gift. Careful planning can help minimise potential CGT liabilities.
Care Home Fees
Gifting a property can impact eligibility for benefits, including assistance with care home fees.
Local authorities may view the gift as a deliberate deprivation of assets, potentially affecting your ability to receive financial support for care. This is an important factor that should not be overlooked.
Other Potential Issues
There are several other risks associated with gifting property, including:
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Mortgages and liabilities – Transferring a mortgaged property involves the lender’s consent and potential liability for any outstanding mortgage payments.
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Equity release and charges – Properties with equity release or charges may require additional legal and financial considerations.
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Family disputes – Gifting property can sometimes lead to misunderstandings or disagreements regarding expectations and responsibilities associated with the property.
Seeking Professional Advice
If you are planning something as life-changing as gifting a property, it is always best to seek professional advice first.
A solicitor or tax adviser can provide tailored guidance based on your circumstances and ensure all documentation is correctly drafted and completed, reducing the risk of future disputes or unforeseen liabilities.
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