Can I Put My House in My Son's Name to Avoid Inheritance Tax?
In almost all cases, no. If you transfer your home to your son but continue living there, HMRC’s gift with reservation of benefit rules keep the property in your estate for IHT purposes. You also lose the £175,000 residence nil-rate band, which can actually increase your total tax bill.
Transferring your home to your son while continuing to live there will not remove it from your estate for IHT purposes. HMRC calls this a "gift with reservation of benefit."
If you gift your home but carry on living in it rent-free, HMRC treats it as still belonging to you. The value stays in your estate when you die, and no IHT saving is achieved. The only way around this is to pay your son full market rent, which most people do not want to do.
If you genuinely move out and your son takes full possession, the gift becomes a potentially exempt transfer. Survive seven years and it falls outside your estate. Die within seven years and the value is added back.
There is another problem. Once the property is in your son's name, you lose the £175,000 residence nil-rate band. This can actually increase the total IHT bill rather than reduce it.
There is also a capital gains tax risk. If your son later sells the property, he may owe capital gains tax on any increase in value since you made the gift. Overall, this approach usually creates more problems than it solves.
If you gift your home but carry on living in it rent-free, HMRC treats it as still belonging to you. The value stays in your estate when you die, and no IHT saving is achieved. The only way around this is to pay your son full market rent, which most people do not want to do.
If you genuinely move out and your son takes full possession, the gift becomes a potentially exempt transfer. Survive seven years and it falls outside your estate. Die within seven years and the value is added back.
There is another problem. Once the property is in your son's name, you lose the £175,000 residence nil-rate band. This can actually increase the total IHT bill rather than reduce it.
There is also a capital gains tax risk. If your son later sells the property, he may owe capital gains tax on any increase in value since you made the gift. Overall, this approach usually creates more problems than it solves.
What HMRC Looks For: The Gift With Reservation Rules in Detail
HMRC investigated 220 gift with reservation cases in 2023/24 alone, resulting in an additional £61 million of assets being brought back into estates for IHT purposes (HMRC enforcement data). The rules under Finance Act 1986, section 102 are clear: if you continue to benefit from a gifted asset, it remains in your estate regardless of whose name is on the title deeds.
“Benefit” is interpreted broadly. Living in the property rent-free is the obvious trigger, but HMRC also catches less obvious scenarios: storing belongings there, using a room when visiting, having a key and treating the property as available to you, or receiving any financial benefit connected to the property.
The only way to avoid the reservation rules while still living in the property is to pay your son a full open-market rent, reviewed annually to stay current. That rent is taxable income for your son. Most families find this arrangement commercially pointless, as the rent payments effectively transfer money back, negating the IHT benefit.
“Benefit” is interpreted broadly. Living in the property rent-free is the obvious trigger, but HMRC also catches less obvious scenarios: storing belongings there, using a room when visiting, having a key and treating the property as available to you, or receiving any financial benefit connected to the property.
The only way to avoid the reservation rules while still living in the property is to pay your son a full open-market rent, reviewed annually to stay current. That rent is taxable income for your son. Most families find this arrangement commercially pointless, as the rent payments effectively transfer money back, negating the IHT benefit.
The Residence Nil-Rate Band Problem
Lose this allowance and you’re looking at an extra £70,000 in tax on a £700,000 estate.
The residence nil-rate band (RNRB) gives each person an additional £175,000 IHT-free allowance (£350,000 for couples) when they leave their home to direct descendants. This only applies if you own the property at death and leave it to children or grandchildren through your will. Transfer the property during your lifetime and you lose the RNRB entirely. Combined with the gift with reservation rules keeping the property in your estate anyway, you end up paying more tax than if you had done nothing at all.
The residence nil-rate band (RNRB) gives each person an additional £175,000 IHT-free allowance (£350,000 for couples) when they leave their home to direct descendants. This only applies if you own the property at death and leave it to children or grandchildren through your will. Transfer the property during your lifetime and you lose the RNRB entirely. Combined with the gift with reservation rules keeping the property in your estate anyway, you end up paying more tax than if you had done nothing at all.
Capital Gains Tax: The Hidden Cost Your Son Faces
When you gift a property, HMRC treats it as a disposal at current market value for capital gains tax purposes. Your son’s base cost for future CGT calculations becomes the property’s value on the day you gifted it. If the property later increases in value, your son pays CGT at 18% (basic rate) or 24% (higher rate) on any gain when he eventually sells, with only the £3,000 annual CGT allowance (2026/27) to offset against it.
Holdover relief under section 165 TCGA 1992, which can defer CGT on certain business gifts, is generally not available for residential property. This means the CGT liability crystallises immediately or falls on your son at the point of sale.
For most families, professional inheritance tax planning using the existing nil-rate bands, gifting from surplus income, and life insurance written in trust achieves far better results than a property transfer. If you are considering transferring property, seek advice on the disadvantages of putting your house in a trust as an alternative, as trusts carry their own set of complications.
Holdover relief under section 165 TCGA 1992, which can defer CGT on certain business gifts, is generally not available for residential property. This means the CGT liability crystallises immediately or falls on your son at the point of sale.
For most families, professional inheritance tax planning using the existing nil-rate bands, gifting from surplus income, and life insurance written in trust achieves far better results than a property transfer. If you are considering transferring property, seek advice on the disadvantages of putting your house in a trust as an alternative, as trusts carry their own set of complications.