Should you give your home to your grandchildren?

Gifting your home could help your grandchildren, but may carry tax and financial risks

For grandparents with substantial property wealth, gifting their home may seem an attractive way to give younger family members a helping hand. It could provide grandchildren with a valuable asset or help them secure a home at a time when getting onto the property ladder can be difficult.

However, giving away your home is very different from leaving it to someone in your Will. Once ownership passes to your grandchild, you no longer have the same control over the property. Inheritance Tax, Capital Gains Tax, potential care costs, and the practical consequences of no longer owning your home all need to be considered.

Understand the seven-year rule

An outright gift may fall outside your estate for Inheritance Tax purposes if you survive for seven years after making it. If you die within seven years, however, the gift may be brought into account when calculating any Inheritance Tax due.

For 2026/27, the standard Inheritance Tax nil-rate band is £325,000. A residence nil-rate band of up to £175,000 may also be available when a qualifying home is passed to direct descendants, on death, including grandchildren, provided the relevant conditions and the £2 million estate threshold are met.

Beware of gifting and staying put

One of the biggest traps is continuing to live in a property after giving it away. If you gift your home but continue living there without paying the new owner full market rent, HM Revenue & Customs may treat it as a gift with reservation of benefit.

In that situation, the property can still form part of your estate for Inheritance Tax purposes when you die, even if more than seven years have passed since the original gift. Simply putting the property into a grandchild’s name does not necessarily remove it from your estate.

Think about your own security

Giving away your home could leave you financially exposed. If you later need to move, downsize, or pay for care, you may no longer have the same asset to help cover those costs.

There is also the question of control. Your grandchild could decide to sell the property, remortgage it, or otherwise deal with it as its legal owner. Their financial circumstances could also change, potentially putting the property at risk.

Don’t overlook other taxes

Inheritance Tax is not the only consideration. Depending on the circumstances, transferring a property could have Capital Gains Tax implications. The recipient’s future tax position may also be affected if they eventually sell the property.

There can also be legal and practical considerations, particularly when several family members are involved. A gift made without careful planning could lead to disagreements or leave other beneficiaries feeling disadvantaged.

Could there be an alternative?

You do not necessarily need to give away your home to help your grandchildren. Depending on your circumstances, you might instead consider gifting cash towards a deposit, helping with other costs, or leaving the property to them in your Will.

The right approach will depend on your objectives, assets, income requirements and family circumstances. What seems like a simple way to reduce Inheritance Tax could ultimately create financial difficulties or fail to achieve the intended tax outcome. We can help you understand the potential tax implications and consider an estate-planning strategy that supports your family while protecting your financial security.

Get professional advice first

Giving away your home is a major financial and estate-planning decision. Once ownership has transferred, reversing the arrangement may be difficult, and the tax treatment can depend on the precise circumstances of the gift.

If you are considering gifting your home or other assets to your grandchildren, please contact us to discuss your situation.

THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. ESTATE AND TAX PLANNING ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.