Can You Sell Part of Your House to a Family Member?

Selling part of your house to a family member may seem unusual, but it is becoming an increasingly popular option in the UK. There are numerous reasons why homeowners consider this approach, including assisting their children in obtaining a mortgage, managing inheritance planning, and sharing the burden of household expenses. However, it is important to note that selling a portion of your property is not as simple as it may appear. Legal, tax, and mortgage issues can become complicated if not handled properly.

Let’s look at whether you can sell a part of your house to a family member in the UK, how the process works, and what you should know to avoid potential pitfalls.

Can you legally sell a share of your property in the UK?

Yes, you can sell a portion of your home in the UK, even to a family member like your son, daughter, sibling, or partner. This is commonly referred to as a transfer of equity or the sale of beneficial interest.

You do not have to sell the entire property to accomplish this. For example, if you own your home outright or jointly with someone else, you could sell 25%, 50%, or another agreed-upon percentage to a family member. This allows the new co-owner to build equity in the home without having to buy the entire property.

However, such arrangements must be carefully planned and legally documented. You will need the assistance of a solicitor to ensure that the transfer is in accordance with property law, mortgage requirements (if applicable), and tax regulations.

Why might someone sell part of their house to a family member?

There are several reasons why a homeowner may decide to sell a portion of their property to a relative:

• Helping a child or grandchild get on the property ladder: Many first-time buyers are priced out of the market, so this can be an effective way to help them own a portion of a home.
• Inheritance and estate planning: Transferring a portion of your property can be an effective way to manage inheritance tax liabilities or distribute your estate in advance.
• To share ongoing costs: co-ownership can help reduce living expenses because each party contributes to bills, maintenance, and mortgage payments.
• Following a relationship breakdown, property ownership may need to be restructured as a result of divorce or separation.
• For cohabitation or care: A family member can move in to provide care or company while also contributing financially through shared ownership.

Regardless of the reason, the transaction should be treated as a formal legal and financial agreement to protect all parties involved.

Types of ownership: Joint tenants vs tenants in common

Before transferring or selling a portion of your home, you must decide what type of joint ownership you will enter into.

Joint tenants

• Both owners have equal rights to the entire property.
• If a person dies, their share is automatically transferred to the surviving owner.
• Not suitable if you intend to leave your share to someone else in your will.

Tenants in common

• Each party owns a separate share, which may be unequal (for example, 60/40).
• Each share may be sold, mortgaged, or left to someone else in a will.
• A more flexible option, particularly for family members who want to specify exact contributions.

Tenants in common is typically the best structure for selling to a family member because it allows for more transparent financial arrangements and future planning.

How is the mortgage affected if you sell part of your home to a relative?

If you still have a mortgage on your home, things become a little more complicated. Before proceeding, you must notify and obtain consent from your lender. The lender is likely to want to:

• Evaluate the new co-owner’s credit and income.
• Decide whether to remortgage the property in joint names.
• Approve the percentage of ownership for sale.

If a family member takes on a portion of the mortgage, they will become jointly liable for the debt. If they are paying cash for the share and it will not be added to the mortgage, the lender must still approve the transaction.

What are the tax implications when you sell a share of a property to a relative?

Selling a portion of your home to a relative can result in several tax consequences.

Capital Gains Tax (CGT)

Capital gains tax may be levied on any increase in the value of the property being sold. However, you may not have to pay CGT if:

• The house is your primary residence (Private Residence Relief applies).
• The gain is within your annual CGT allowance.

CGT is more likely to apply if the property is a second home or a buy-to-let, even if you’re selling to a close relative.

Stamp Duty Land Tax (SDLT)

Even if no money changes hands, the buyer (your family member) may be required to pay stamp duty. If they accept responsibility for a portion of the mortgage or provide other consideration, SDLT is calculated on that amount. This often surprises people, so it’s important to consider it.

Steps to selling a share of your property

Seek independent legal advice

Each party should hire their own lawyer to avoid conflicts of interest and ensure that the transaction is structured fairly.

Get a formal property valuation

A RICS surveyor can determine the market value of the entire property, allowing you to calculate the appropriate price for the share you’re selling.

Agree on the terms of the sale

Determine the share being sold and whether any ongoing financial contributions are expected (for example, bills or repairs).

Draft a declaration of trust

This legal document specifies who owns what portion of the property, what happens if one party wishes to sell, and how the proceeds will be divided.

Inform your mortgage lender 

If applicable, obtain your lender’s consent and make any necessary changes to the mortgage deed.

Register the new ownership with HM Land Registry

The Land Registry must be updated with the new ownership structure.

Common pitfalls to avoid

• Not seeking legal advice: Informal family arrangements can easily result in disputes or financial losses in the future.
• Ignoring tax responsibilities: Failure to account for CGT or SDLT can lead to unexpected tax bills.
• Not taking into account future events: What if one party wants to sell? Or passes away? A well-written declaration of trust can provide answers to these questions in advance.
• Assuming the process goes quickly: Selling a portion of a house can take several weeks or even months, especially if mortgages are involved.

Selling a portion of your home to a family member is not only feasible; it can also be an effective way to manage assets, support loved ones, or plan your estate. However, it is critical to approach the procedure with caution. Seek legal and financial advice, understand your tax obligations, and put everything in writing to protect both parties. 

At Sell House Fast, we understand the complexities of property transactions, particularly those involving family. If you want to unlock equity, downsize, or sell your home quickly while also considering other options such as part-sales, our team is here to help. Get in touch today to receive your free cash offer.