Can I Leave My House to My Children Without Paying Inheritance Tax?

PHS Team

21 Sep, 2025

You can leave your house to your children without paying inheritance tax, but it depends on meeting HMRC’s inheritance tax gifting rules. Factors such as the size of your estate, available allowances, and how the property is passed on all play an important role.

There are also conditions like the 7-year rule, property allowances, and restrictions if you continue living in the house after gifting it. Below, we explain the main rules you should know before making any decisions.

Inheritance Tax Gifting Rules

The inheritance tax gifting rules are set by HMRC. They decide how much can be passed on to children without tax being charged.

• If you leave your home in your will, it will normally form part of your estate. Anything above the threshold could face inheritance tax at 40%.
• There is a main allowance (nil-rate band), plus an additional property allowance (residence nil-rate band) if leaving your home to direct descendants.
• Gifting your house to children during your lifetime can avoid tax only if you live for seven years after making the gift. This is called the 7-year rule.
• If you gift the house but continue to live in it rent-free, HMRC may still count it as part of your estate.

These inheritance tax gift rules UK are extremely important to understand before making any decisions.

How Much Can You Gift Tax Free?

Families often ask, “How much can you gift tax-free?” HMRC sets out clear allowances that can reduce future tax bills.

• Each person can give away up to £3,000 each year tax-free.
• Small gifts of up to £250 per person per year are usually tax-free.
• Wedding gifts are tax-free up to £1,000, or £5,000 if it is your child’s wedding.
• Larger gifts may fall under the 7-year rule. Survive for seven years after the gift, and it becomes tax-free.

While these allowances work well for gifting money to children, giving away property is trickier. Houses usually exceed the yearly tax-free limits, meaning the 7-year rule becomes crucial.

How the Seven-Year Rule Works

The seven-year rule works on a sliding scale for inheritance tax. If you pass away:

• If you die within 3 years of making the gift, the full 40% inheritance tax is applied on the gift.
• If you die between 3 and 4 years after the gift, the tax rate reduces to 32%.
• If you die between 4 and 5 years, the inheritance tax falls further to 24%.
• If you die between 5 and 6 years, the tax rate drops to 16%.
• If you die between 6 and 7 years, only 8% inheritance tax is charged.
• If you survive 7 or more years after giving the gift, no inheritance tax is due on that gift.

This means the longer you live after giving a gift, the less inheritance tax will be due, until it eventually reaches zero if you survive seven years or more.

HMRC Crackdown on Gifts to Children

Recently, there has been an HMRC crackdown on gifts to children, especially around property and large sums of money. HMRC looks carefully at whether the person making the gift still benefits from it.

• If parents gift their house but keep living in it without paying rent, HMRC can challenge it.
• Large gifts made shortly before death are also reviewed closely.
• Even gifts of money may face questions if they affect your standard of living.

Because gifts taxed rules are being enforced more strictly, professional advice is highly recommended. Accountants and tax planners can explain how best to protect your home and savings.

Conclusion

In conclusion, leaving your house to your children without paying inheritance tax requires careful planning and a good understanding of the inheritance tax gifting rules. 

The important thing is to be aware of the seven-year rule, the annual gift allowances, and how large gifts can impact your estate if you pass away within seven years. 

By using these rules wisely, you can reduce the potential inheritance tax liability on your property and other assets.

Speak to an expert

At PHS Associates, we help families, small businesses, and individuals with tax, VAT, payroll, and self-assessment. If you want to understand the inheritance tax gifting rules or plan how to pass your home to your children, speak to our accountants today. 

We’ll guide you through the process in simple terms and help protect your family’s future. Call us at 0208 8611685 or email info@phs-uk.co.uk to start planning your estate the right way and protect your assets for the future.

Frequently Asked Questions