1. What is a Gift of Equity?

A gift of equity occurs when a property owner sells their home to a family member or friend below its fair market value (FMV). The difference between the FMV and the sale price is considered the gift of equity.

2. How the Calculator Works

The calculator uses the simple formula:

Where:

• FMV — Fair Market Value of the property (GBP)
• Sale Price — Actual sale price (GBP)

Explanation: This calculation determines the monetary value of the equity being gifted in the transaction.

3. UK Tax Implications

Details: In the UK, gifts of equity may have inheritance tax implications if the giver dies within 7 years. The gift might be considered a "potentially exempt transfer" and could be subject to inheritance tax if it exceeds certain thresholds.

4. Using the Calculator

Tips: Enter the current fair market value of the property and the actual sale price. Both values should be in GBP. The calculator will show the equity gift amount.

5. Frequently Asked Questions (FAQ)

Q1: Is a gift of equity taxable in the UK?
A: It's not immediately taxable but may have inheritance tax implications if the giver dies within 7 years.

Q2: What's the annual gift allowance in the UK?
A: You can give away £3,000 each tax year without it being added to the value of your estate.

Q3: Do I need to declare a gift of equity?
A: While not always required, it's advisable to document the gift properly for tax purposes.

Q4: Can a gift of equity be used for a mortgage deposit?
A: Yes, many UK lenders accept gifted deposits, though they typically require a signed gift letter.

Q5: How is FMV determined for UK properties?
A: FMV is typically established through professional valuations or recent comparable sales in the area.