The British "give away" their homes to family members - The number of homes changing ownership to avoid taxes is increasing
An increasing number of UK homes will be passed for free this year as homeowners seek to escape rising taxes by passing assets on to family members. More than 220,000 homes are on track to change hands, in whole or in part, with no money down in 2024, around 45 per cent more than last year, according to freedom of information requests submitted to the Land Registry. In London, more than a quarter of homes will change ownership.
About 4 in 10 gifted transactions in 2024 are whole estates, typically involving a parent and a child. The remainder includes a portion of the property in an arrangement that often ends within generations, such as a homeowner who donates a portion of the property to a non-homeowner partner. "Rising transaction costs, particularly the higher rate of stamp duty for those who own more than one property, means that ownership is increasingly spread across the family," the analysts explain.
In the UK, donating property can be done tax-free as long as the person passing on the assets lives for at least another seven years. However, if the person dies within this period, the recipient will have to pay up to 40 percent tax. Changing ownership is also a strategy to avoid paying tax on their future investment.
The so-called Bank of Mom and Dad is an emerging funding source for UK adults looking to get on the UK's expensive housing ladder. The total value of financial donations reached £29 billion in 2018-2020, more than double the level of a decade ago.
Labour's October 30 Budget included a surprise two percentage point rise in stamp duty for landlords and second home owners. It is the latest in a series of hikes designed to deter investors and favor first-time buyers.
The data also underlines the scale of the housing crisis facing the new Labor government after years of rampant house price inflation and a cost of living crisis. High rent inflation is also making it harder for young people to raise enough funds for a deposit without the help of their parents. A recent report estimated that it would take a young family over 14 years to save for a deposit, almost twice as long as in the mid-1990s.
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