Deed of Gift

This our template for a Deed of Gift. This allows you to gift assets to someone during your lifetime. If you instead want to make a gift that takes effect when you die, do so in your Will.

As a gift, the transfer of the assets must not come with strings attached, be subject to any payment or payment-in-kind, or for the exchange of assets, nor must any property be subject to an outstanding mortgage debt (otherwise it will incur SDLT – see below).

You can use this deed of gift to transfer by way of gift any type of asset, for example:

• freehold property,
• long leasehold property,
• cash, and/or
• other investments, such as shares.

For example, you can use this where mum and dad are making a cash gift to a child to help them buy their first house. Often in this situation, the lawyer doing the conveyancing will ask mum and dad to sign a document to confirm the cash is not a loan, but a gift. Legalo’s deed of gift is ideal for this purpose.

Deed of Gifts inter vivos (during your lifetime)

If you make substantial gifts and then die within 7 years afterwards, the value of the gift may be added back to your estate for the purposes of calculating your estate’s liability to Inheritance Tax. For more on how this takes effect on your deed of gift, read our blog post on the 7-year rule.

Should you be using a Deed of Variation instead of a Deed of Gift?

If you have received an inheritance and within 2 years of the date of death of the person it was received from you wish to make a gift of some or all of it to someone (such as your children), then use our Deed of Variation to gain potential UK inheritance tax advantages.

Companies making a deed of gifts

While companies can make gifts to charities, they cannot otherwise make gifts. Gifts that are not to charities cause 2 problems for companies. Firstly, trying to transfer property out of a company to a person or other body that is not a charity is likely to attract tax (usually as a taxable benefit-in-kind – income tax and national insurance). Secondly, companies are supposed to make profit for their shareholders and so cannot simply give their assets away: it is against their fundamental purpose. As a result, the directors making such a gift could be held personally accountable to the shareholders for such losses.

Transfer of freehold or long leasehold property by a deed of gift

To effect the transfer of the property, you will need to deal with it at the Land Registry. The relevant forms are available free of charge from the Land Registry website, such as TR1 and TP1 forms. You may also need to file an SDLT return (see below), but normally you would not have any SDLT to pay on a gifted property.
For other assets (e.g. shares), you should complete the transfer and registration of the new owner in the appropriate fashion.

Transfer of land subject to a mortgage debt

If land is subject to a mortgage, it usually means that you cannot transfer it. If you get the bank’s permission, they might allow it, but this is very rare. Normally, they would have the old mortgage discharged and a new one arranged, rather than allow the (more simple) transfer of the property subject to the mortgage.
If you do manage to transfer the property subject to a mortgage, then HMRC will charge you Stamp Duty Land Tax on the value of the outstanding mortgage and you will need to file an SDLT return.

Making deeds of gifts when you are insolvent or bankrupt

If you are an undischarged bankrupt, you cannot make any significant gifts. If you have outstanding debts or liabilities, you cannot make gifts that would mean you are unable to pay your debts: this would be unfair to your creditors, and, as a result, the Insolvency Act 1986 may make the attempted deed of gift invalid.

Making gifts when you are doing so in order to become, or remain, eligible for Benefits is also illegal and would be considered to be benefits fraud, which is a criminal offence.

Do not make a gift in either of these situations.

As another comment, you should not gift an asset, such as property, to someone, but expect to retain the right to the income arising from it, such as rent on a property or dividends from shares. The income would belong to the new owner from the date it was gifted to them.

FAQs on Deeds of Gift

We have answered popular questions from the Internet below about deeds of gift.

Can I do my own Deed of Gift?

You can, however here at Legalo we have done the hard work for you.  We provide a deed of gift template that you can tailor to your personal needs.

How do you write a gift deed?

The document should provide details of the parties involved in the gift and the nature of the gift, be that money or property.

But as we have mentioned above, we have prepared this document with all the relevant detail which ensures peace of mind.

Do you need a solicitor for Deed of Gift?

You can use a solicitor to prepare a deed of gift, but we at Legalo have prepared an easily accessible document that will only cost you £24.95.  A fraction of the cost of using a firm of solicitors.

Who signs a deed of gift?

The signatories to the deed of gift must be the parties involved in the gift, so the person receiving the gift (the donee) and the person giving the gift (the donor).

Who can witness a deed of gift?

A witness must always be an independent party.  The witness should not someone who has anything to gain or lose from the gift. The witness should be aged 18 or older; and preferably not related to the signatory. You do not need any sort of lawyer to witness the deed of gift.

Should a gift deed be notarized?

A deed of gift does not need to be notarized in the United Kingdom. It merely needs to be signed with you by an independent witness, as outlined above.

How much does a Deed of Gift cost UK?

At Legalo, we only charge you £24.95 for our deed of gift template. What a bargain! You can use it multiple times at no further cost.

What makes a deed of gift valid?

You must sign or execute a deed of gift correctly. The written guide that comes with our template tells you exactly how to do this.

Does a deed of gift need to be registered?

No, unless it is a gift of land, property or shares. Then, for land or property, you would need to register the new owner of the land or property with the Land Registry using an AP1 form and ID1 forms for any party who is not using a solicitor. See the Land Registry’s website for full details and for the forms needed.

For a gift of shares where you hold a physical share certificate, you would also need a stock transfer form, so you can submit that to the relevant company for registration. Stock transfer forms are available free of charge on the Internet from various sources. Digitally-held shares will need to be transferred digitally and you should check with the company concerned as to how you do that.

However, whatever the nature of the gift you should retain a copy of the deed of gift somewhere safe, in case anyone ever questions the ownership of the asset or the date you made the gift. For example, HMRC might want to see that you do not gift it within 7 years before you pass away. Otherwise, you have to take it into account in your estate for Inheritance Tax purposes, if it is over the annual exemptions. See our blog article on this.

How long does a deed of gift take?

While you might need to wait a couple of weeks or more for a solicitor to draft a deed of gift for you, with Legalo’s instant service, you can download your template as soon as you have purchased it. Then you can complete it in just a few minutes.

What are disadvantages of gift deed?

If you make a gift, you cannot take it back just because you change your mind later on. There can be a potential disadvantage if you make a gift to a descendant, such as your child, who marries and later divorces. The gift forms part of the couple’s joint property. You would expect that the court would be divide it between them as part of their assets.

There would be an exception to this if they had a pre-nuptial or post-nuptial agreement. It would  specify that the asset was:

• for the child to retain; and
• not count towards their joint asset total.

In the earlier scenario, it might have been better to put the asset into a trust, the beneficiaries of which were:

• the child; and
• any children and grandchildren, etc they have.

What are the legal requirements of a gift UK?

A true gift is one that is outright. This means that the person giving the gift does not:

• retain use of the asset gifted; and
• does not receive payment or anything of value or benefit to them in return.

The exception to the first point is if, say, you gift half of a property, then you still have full use of the property. If you gift the whole of a property, then you must not retain use of it without paying a market rate of rent to the new owner. If you contravene this, then HMRC can add the asset back into your estate for Inheritance Tax purposes.

Clauses in this Deed of Gift

The template comes with a full written guide to help you fill it in quickly and easily. Below is an excerpt from the guide, showing the main points. We have deliberately kept this template short and simple, as it really does not need to be any more complex than that.

1. Interpretation

Normally this clause defines the main terms used in the deed. In this case, as the document is very simple, it just sets out some legal rules of interpretation.

2. Transfer by way of gift

This is the main clause which states that you made the gift. You should set out the assets you are gifting via this deed of gift clearly in the schedule.

3. Stamp Duty and Stamp Duty Land Tax on gifts

If you make the gift of property subject to a mortgage, then SDLT will be due, so you may need to amend  or delete clause 3.1. If the gift is not in fact an outright gift, but is in exchange for anything of any value, then it will not be free of stamp duty or SDLT.

4. Warranties by the Donor

We have included some warranties that the donor owns the asset(s) they are gifting, etc. Most of these are more suitable where you are gifting property. Delete any that do not seem relevant to your situation. If the gift is simply cash, feel free to delete this whole clause.

5. Entire agreement

This clause limits the parties’ reliance on representations and warranties (i.e. anything said or in writing before you sign the deed) that you are not including in the deed.

6. Rights of third parties

This clause excludes the Contracts (Rights of Third Parties) Act 1999 from applying to the Agreement so that only the parties to the Agreement can enforce it.

7. Law and jurisdiction

If any party is based abroad, you may wish to change the jurisdiction clause to reflect this. Also make it non-exclusive. Where the donor lives in the UK, the jurisdiction should be exclusively in the relevant part of the UK, such as England (covering England and Wales), Scotland or Northern Ireland as applicable (change it if need be if it is not England or Wales).

The Schedule in the deed of gift

As mentioned above, you should list the assets you are transferring in the schedule, such as freehold or long leasehold property, bank accounts, cash, shares and other investments. If there are a lot of shares in various companies, you could describe them in general terms, rather than listing them individually. Alternatively, refer to a separate list where they are all detailed. When the freehold property is only a part share of a property, then set out the percentage share. If the property is subject to any mortgage then set out the current level of mortgage debt for which the recipient is taking over responsibility. You should identify the property by its title number (if registered property) and by its full postal address.