How To Minimise Gift Tax Liability On A £1 Million Property Transfer

Transferring a high-value property through a gift carries a potential inheritance tax liability if it exceeds the available allowances. For a £1 million property gift, the tax exposure could be substantial. However, there are ways to legally structure the transfer that can help minimise this tax burden through the full use of exemptions.

Maximise use of the annual gift exemption

In the UK, a gift exemption allows an individual to give away up to a certain tax-free amount each tax year to another individual. For property, this can be used to transfer a portion of the value annually as an exempt gift. While the total £1 million cannot be covered by one year’s allowance, spreading the gift over several years ensures the exemption is fully utilised and reduces overall liability.

Transfer property into joint names

For married couples and civil partners, an outright gift to a spouse is entirely exempt from inheritance tax no matter the value. Even if divorce or separation occurs, the exemption applies if the gift was made during marriage. Transferring the £1 million property into joint names between spouses can thus remove any future tax liability on the full amount.

Use Potentially Exempt Transfers

Gifting the property as a Potentially Exempt Transfer means that if the giver survives 7 years from the date of the gift, no inheritance tax becomes payable. This tax planning technique removes the tax risk on the gift if the giver lives more than 7 years after the date of transfer. Even if they pass away within 7 years, the tax rate reduces the longer they survive after making the gift.

Make exempt gifts out of income

If the giver can prove the gift was made out of regular surplus income and leaves them with sufficient income to maintain their normal lifestyle, this transfer can be exempt from inheritance tax. By gifting portions of the £1 million value over several years in separate transfers structured as exempt gifts from income, the liability is reduced.

Claim available property exemptions

Depending on the circumstances, it may be possible to claim targeted inheritance tax reliefs on gifting property, like main residence nil-rate band and gifts for national purposes. Equally, contributing towards the recipient’s living costs from regular income instead of a lump sum gift can utilise annual exemptions. Exploring allowances like these can all contribute to legally reducing tax on gifts above the standard threshold.

Specialist tax planning is advisable to ensure gifts are structured in the most optimal way to minimise exposure. With careful use of exemptions and allowances, the inheritance tax on gifting a high-value property to a family member can potentially be reduced or avoided altogether.

Conclusion

Transferring a high-value property by gift carries major tax implications that must be addressed through proper planning. However, there are legal ways to minimise the liability using exemptions and allowances. Prior to gifting such a huge amount, the question may arise: “How much is gift tax on 1 million pounds?” While the tax exposure on gifting a £1 million property is substantial, taking full advantage of the annual exemptions, spouse exemptions, and other reliefs can significantly reduce the amount payable. Spreading the gift over multiple small transfers, putting the property into joint spousal ownership, and gifting from regular income can all help maximise the use of exemptions to legally mitigate liability. Specialist tax advice is key, as inappropriately structured gifts can result in greater tax payments than necessary. With the right approach, it is possible to undertake £1 million in property gifts to families in a tax-efficient manner. Proper planning and advice ensure the tax does not outweigh the generosity of the gift. Ultimately, forethought about minimising gift tax allows high-value property wealth to be shared without creating excessive tax burdens.