How to Sell a House Privately to a Family Member

Selling a house privately to a family member in the UK is perfectly legal and can often be more straightforward than selling on the open market. However, it still involves many of the same legal steps as a traditional sale and must be handled carefully to avoid issues with tax, lending, and property law. Whether you are selling to your child, sibling or another relative, it is important to ensure the process is properly documented, fairly valued, and legally compliant.

Selling within the family can offer benefits such as reduced fees, faster timescales and more flexible arrangements. But it also raises questions around fair market value, stamp duty, gifting, and the need for independent legal advice on both sides.

Agreeing the Terms of the Sale

Before anything else, you and the family member should agree on the basics of the sale. This includes the purchase price, what will be included in the sale, and whether the property is being sold at full market value, a discounted price, or as a partial gift. If the buyer is obtaining a mortgage, the lender will usually require the sale to be conducted at market value or will treat any discount as a gifted deposit.

It is also important to agree whether the buyer will be paying in cash or relying on finance, and to confirm who will cover legal and other associated costs.

Obtaining a Property Valuation

Even when selling to family, you should still get a professional property valuation. This ensures transparency and can help avoid later disputes, especially if the property is being sold at below market value. Lenders will also want a valuation if the buyer is applying for a mortgage. You can use an estate agent or independent surveyor to provide a formal market assessment.

A valuation is also important for tax purposes. HMRC may consider any discount or gift element when calculating inheritance tax or capital gains tax liabilities, particularly if the seller dies within seven years of the transfer.

Appointing Solicitors

Each party must have their own solicitor or conveyancer. Even though this is a private and friendly transaction, both sides still require independent legal representation to handle the contracts, due diligence, and transfer of ownership.

The seller’s solicitor will draft the contract of sale and provide property information, while the buyer’s solicitor will carry out searches and ensure any mortgage requirements are satisfied. Using experienced professionals helps avoid costly errors and ensures the transaction complies with UK law.

Checking Mortgage Eligibility

If the buyer is using a mortgage, their lender must be informed that the purchase is from a relative. This is because family transactions can carry additional risks from the lender’s perspective, especially where the price is below market value.

Many lenders will require the seller to sign a gifted deposit letter confirming that any discount is a gift and not a repayable loan. The lender may also want reassurance that the buyer is acting independently and is not under pressure.

If the buyer is paying cash, this stage is simplified, though anti-money laundering checks still apply.

Handling Gifted Equity and Tax Implications

Selling a property at less than market value creates a situation known as ‘gifted equity’. For example, if a property is worth £300,000 and the buyer is paying £200,000, the £100,000 difference is treated as a gift. This can have tax consequences.

The gifted amount may be considered part of the seller’s estate for inheritance tax purposes if they die within seven years. If the property is not the seller’s main residence, capital gains tax may also apply on the difference between the purchase price and the original acquisition cost.

It is advisable to speak to a tax adviser or accountant before agreeing a discounted or gifted sale to ensure all potential liabilities are understood and properly recorded.

Completing the Sale and Registering the Transfer

Once the sale has been agreed, the solicitors will proceed with the usual conveyancing steps. This includes drafting the sale contract, organising property searches, confirming funding, and completing the Land Registry application.

The process can be faster than a standard sale, particularly if no mortgage is involved, and completion can often take place within a few weeks. After completion, the buyer’s solicitor will register the property with HM Land Registry, and the buyer will become the legal owner.

Stamp Duty and Fees

Even when buying from a relative, stamp duty land tax (SDLT) still applies. The buyer must pay SDLT based on the actual purchase price, not the market value. However, if the property is gifted with no money changing hands and no mortgage involved, stamp duty is not usually payable.

Both parties will need to pay solicitor fees, and if a mortgage is involved, the buyer will also have valuation and lender-related costs. While selling privately may save estate agency fees, it is still important to budget for the legal side of the transaction.

Conclusion

Selling a house privately to a family member in the UK is entirely possible and can be a smooth process with the right preparation. The key is to handle it with the same care and formality as any other property sale. A clear agreement on terms, professional valuations, legal advice and attention to tax implications will help protect both parties and ensure a successful transfer of ownership.