As recently reported in the press many believe that they can transfer their house to their children and after 7 years that there is no IHT?  Don’t get caught out by the Gift with Reservation of Benefit rule.

Yes you can transfer your house to your children and after 7 years that there is no Inheritance Tax.  But don’t get caught out by the Gift with Reservation of Benefit rule.  It’s more complicated than most people think.


First if you retain any significant benefit in the property, the exemption is lost.  So if you continue to live in the property, it’s no longer yours but it is still taxed for IHT as if it was yours.  In other words you get the worst of both worlds.


Secondly to avoid the Gift with Reservation of Benefit Rule you need to pay full market rent.  It will feel odd having to pay rent for your own house.  You have to pay the market rent until you die, not just for 7 years. And more troublingly you have to keep the rent up to date, in other words you need to have the amount which you pay reviewed annually.  Even if you pay rent but you fall behind with the market rent then the exemption will fail.


Thirdly the transferees (usually the children) will need to pay income tax on the rent received. 


Fourth, worse than that the transferees will be liable for Capital Gains Tax (usually at 28%) on the gain from the time of the transfer until the eventual sale. 


Therefore it sounds easy but it can be difficult to keep on the right side of the rules.


Often a better idea is to use an equity release scheme to release capital.  You gift that capital to the children.  It is still a gift which will be exempt from IHT after 7 years but there are no Gift with Reservation of Benefit or Income Tax problems or Capital Gains Tax problems.


The children invest the capital released and the exercise can be cost neutral as the growth on the investment can match the interest on the lifetime mortgage.


So why not arrange a chat with one of our Consultants.


Just call  0800 852 1999 or email us at

Home visits are available. 

McClure Solicitors in association with McClure Wealth Management

Act now to save later.
Arrange a free consultation today.

0800 852 1999

Call our dedicated appointments line today or complete the form provided to arrange your first meeting with McClure. It will cost you nothing and could save you and your loved ones money, time and hassle.

  • Grey Facebook Icon
  • Grey Twitter Icon
  • Grey LinkedIn Icon

Aberdeen | Bath  |  Birmingham  | Cardiff  |  Edinburgh  |  Exeter  |  Glasgow  |  Inverclyde  | Leeds |  Liverpool  |  London  |  Newcastle  |  Plymouth  |  Southport  |  Truro

Appointments (Freephone) 0800 852 1999  |  General Enquiries (Local Rates) 0845 450 2408  |  Email

To read about how we handle your personal data, please view our Privacy Notice

Find out more about our Terms of Business

WW & J McClure Trust Corporation’s Terms & Conditions

Copyright © McClure Solicitors 2020. All Rights Reserved

W W & J McClure Ltd trading as McClure Solicitors.

Directors: Andrew J Robertson, Stewart Moore & Stephanie Hutton

Authorised and Regulated by the Solicitors Regulation Authority (Reg No 618692)

Authorised and Regulated by the Law Society of Scotland (Reg No 19114)