Transcription
Most people think that if they gift their house to their children, it's a good way of getting around inheritance tax and stamp duty tax. In reality, this could be one of the worst mistakes that you make in your life. I personally know people that have done this and massively regretted it.
In 2026, the rules have shifted. There's new caps on reliefs, new rules that mean if you structure it wrong, you won't even be saving any tax at all. In fact, you'll actually be potentially shooting yourself in the foot and even bankrupting yourself for later in life.
As somebody who owns millions and millions of pounds in property in the UK and overseas and somebody a father of four children, this is a topic that's very close to my heart because I've seen people personally losing not only tens hundreds of thousands of pounds because they didn't understand the tax laws in the UK properly, but also losing their houses.
But luckily for you, as a Samuel Leaves YouTube subscriber, I have not only personally grappled with these things and issues, but also spent more money in consultancy fees than most people would earn in a lifetime. So today in this video, I'm going to break down all the lessons that I have personally learned and show you the strategies that the top 1% are using to pass down their wealth to their children tax efficiently.
Before doing anything, you should first watch this video and then before actually pulling the trigger and gifting your house or not and making these decisions, you should always seek professional independent financial advice because this can vary case by case, certainly country by country.
In the UK, we pay stamp duty tax when we sell a house. You might say, "Well, I'm not going to sell a house. I'm going to give the house away and therefore I'll pay no stamp duty tax." However, you may still have to pay stamp duty, especially if the property's got a mortgage on it. If the house has got a mortgage on it, then when you pass that on to your children, they very likely will still be stamp duty.
But what about inheritance tax? See, if you give your house to your children before you die and then you die, how does it work with inheritance tax? Now, many people will say, as long as you give the house prior to 7 years before you die, it will be completely free of any inheritance tax.
So, why do people gift their house to their children? Well, normally they do it because they've got a house. They're worth a little bit of money. They know they're probably going to die soon, but they know if they leave their assets and they leave their houses to their children, the government are going to come in and take 40% inheritance tax. So, they think, I know, instead of dying and then my house going to my children after I've died, I'll just give my house to my kid now and then won't pay an inheritance tax.
So, the reason it's dumb for a lot of people is they're thinking about inheritance tax for their home, but their home's only worth a few hundred grand anyway. If your house is worth £325,000 or less, you're going to pay zero inheritance tax at all when you leave that to your kids. In fact, there's a second threshold that says if you live in the house and it's your home that you're leaving, actually, you can get up to half a million. And if it's you and your partner or wife that both have the house together, you can actually leave up to 1 million cash taxfree to your kids. So unless you're like a millionaire multi-millionaire thinking about, oh, I'm going to have to gift my house to my kids, so it's it's taxree. It's just absolutely moronic.
Now, some people say, oh, but Sammy, it might be half a million, but it could be more later, and let me just do it cuz I'm so scared of paying any tax. I'll gift it. and and as long as I don't die within seven years, it's taxfree. Well, not necessarily because if you gift your house to your kids, unless then your kid owns it and you're paying your kid rent, if you just continue to live in the house rentree, then you might find that you have to pay the inheritance tax anyway. People don't know this stuff.
Also, when you leave your house to your kid and you're still alive because you're not planning on dying in the next 7 years, otherwise it'd be pointless anyway. You lose complete control. Your kid could literally marry a loony, do what they want with the house, trash it, run parties in it, sell it, and gamble it in Las Vegas, and there is legally absolutely nothing you could do.
So, I think there are far better ways to get around inheritance tax than to gift your house to your kids. Gifting your house to your kids is probably not very smart at all.
Solution one is what we call the debt death strategy. This is absolutely genius. Let's say you've got a house and it's worth half a million pounds and you're thinking, you know what, I don't want to pay inheritance tax. Maybe you don't qualify for the different thresholds. Maybe it's worth a million pound or 2 million. What do you do?
Well, what I would suggest is a better alternative potentially is to borrow against the asset. I've got a house worth a million pounds. I want half a million, please, in debt. take that debt and then use that half a million pounds equity that you've released from your house and loan it as a director's loan to a company, a company that is owned by you and your children and then use that half million to reinvest in properties as a joint venture with your kids. This way you're not giving the house away, you're giving the debt away.
Also, if you had a house worth a million pounds and you took out half a million pounds debt, you're now reducing the value of your estate, meaning that you're going to pay less inheritance tax on that house anyway, and your children will probably be a lot lot richer having a company with half a million pounds injected into it, which they can then snowball and grow than they would be if you just left your 1 million house to them, even if it was taxfree.
A great example of this would be Donald Trump. Donald Trump famously says that he started his empire with just a small loan of $1 million given to him from his dad. "My father gave me a small loan of a million dollars. I came into Manhattan." And a lot of people hate on Trump for this. A SMALL LOAN OF $1 MILLION, but the guy is now a billionaire. Now, if his dad had said to him, I've got a little bit of money, but we're going to wait until I'm dead and I'll give you that money. Would Trump now be a billionaire? No. Would Trump now be president? No. Would America even look the same? No.
So what his dad did was gave him a loan of $1 million, believed in Trump, gave him the skills and the mentorship, and now Trump's a billionaire. Now, of course, that's an extreme example, but you can do the same thing for your kids. Don't think about how can I leave this little bit of money and make sure my kids pay as least tax as possible when I leave this. That's poor mindset. Big mindset is how can I actually utilize debt and start a business with my kids and mentor them? And it's not even about what I leave to them. It's about what I leave in them. That's rich thinking.
Another thing you can do is you can set up a family investment company. Now, how this works is you have alphabetic shares. Now, if you don't know what that means, ask chat GPT cuz I'm not going to go into great detail in it on this video, but let me explain how it works. I've done this many times myself. Alphabetic shares means you have two different types of shares. So, you have a shares and you have B shares. The A shares are held 100% by you and your wife, for example. And the Ashares are the controlling shares, the decision-making, the voting rights. That means that of this investment company, you until you die have all of the voting rights. You decide what gets sold, what gets bought because you own the A shares. The B shares have all the capital value, but no voting rights. This means that the value of the company grows outside of your personal estate. Meaning that when you die, the kids don't pay anywhere near the same inheritance tax on that. But you retain absolute dictatorship of that company until you die. Meaning that if one of your kids, for example, gets divorced, spouse can't force a sale because your kid has no voting rights.
Another way to protect your children from getting hit with inheritance tax rather than gifting them your house like a is to take out whole of life insurance. If you take out whole life insurance, here's how it works, right? And of course, get professional advice, please. My job is to get you thinking and to give you ideas, your job is to then go and speak to professionals and take out appropriate advice for you. But whole of life insurance, here's what you do. You work out how much are my kids going to have to pay in heritage tax. Let's say that am that amount works out to be a million pounds. You've got a few million pound in assets and you work out if I die, my kids will be left with a million pound tax bill. You don't want that to happen because then they'll inherit your estate. Yes. But now they've got to sell bits off to pay for the to pay the HMRC to pay the big tax bill. You don't want them to have that stress and you don't want them have to start selling assets. So what you do is you take out whole life insurance whereby you pay a monthly amount and your life insurance company will ask you how much do you want to have pay out when you die and you say £1 million please to match the amount that HMRC are going to come asking your kids. That way when you die you pass your estate to your kids, pass all your money, pass everything. HMRC come knocking, but you've got whole life insurance and then that HMRC bill gets picked up by the insurance company. Which in my mind, the hundreds of pounds a month that you pay in life insurance, meaning that the hundreds of thousands of pounds that now your kids don't have to pay in life insurance is a far better solution than trying to gift your house to your kids.
Another thing you can do is you could maybe think about getting rich, making loads of money, buying loads of houses, and then moving country to somewhere a little bit sunnier with zero inheritance tax. I mean, it's not a bad idea. Why not actually enjoy the last years of your life when you've worked so hard? Maybe bring your kids with you. Maybe pay for them to come visit on business class flights. Maybe if you've got a few million pounds, sail around the world and enjoy your hard-earned money because you don't owe your kids anything. And it's not about what you leave to them. It's about what you leave in them. Let them see you enjoying life. Let them see you enjoying the fruits of your labor. Spend time with them mentoring them, believing in them, and pushing them to actually maybe educate themsel so they can also build their own financial freedom instead of you building it for them. My kids and I got four of them will be millionaires by the age of 25. And that's not because of what I give to them. I'm not going to give them any money. I'm going to give them education and I'm going to give them opportunity and that is it.
And another thing to consider like I have personally done is maybe consider setting up a trust or a foundation which means that what's in the foundation is not owned by you. If you buy properties, instead of you buying them, you have a foundation or a family trust that owns the properties, which means that when you die, potentially the tax bill will be zero. That is maybe a video for another day. But I don't want to own houses personally at all. Cuz then when I die, there'll be a 40% heritage tax. My kids have now got 60%. But then when they die, every time someone dies, 40% of it goes. But my foundation, for example, it never dies. The tenants continue paying rent. The properties continue rising in value, but the foundation never dies. That is true generational wealth, and that is legacy.
Now, maybe you don't have kids yet. Maybe you are the kid and you're waiting for your parents to help you out or leave you something. Stop waiting for your parents to die. They owe you nothing. Or maybe you're thinking about having kids and you are thinking about generational wealth. You're thinking about what to leave and making it tax efficient. But here's what I'd say. Whether you're young or old, rich or poor, you need to learn the skills of investing money. Because if you've got money to invest, you need to invest that money. If you don't have money, then you need to persuade investors to loan their money to you. Maybe you could have alphabetic shares, but just do it the other way around and you're growing your wealth using not your money, but using your knowledge and your skills. I was the first millionaire in my entire family tree. And now I make a million pounds a month tax-free profit every single month and have done for the last 5 or 6 years. But here's the thing. I know I will not be the last in my family. And the main reason for that is because of what my kids now know and understand.
And I'd like to give you a gift. It's tax-free gift too because it's free. And that is my knowledge. I want to share with you about how to invest smart, how to have a structure which is tax efficient, how you can potentially even make a million pounds this year and legitimately HMRC approved pay zero tax.
If you'd like to achieve true financial freedom in your life and leave generational wealth and legacy for your kids and your kids' kids, then I'm putting on a free training. It's online and I'll leave a link below in the description. I'm not going to be holding anything back and I'm going to be giving you exact step by step of how I've done it and how I've also helped thousands of other people achieve financial freedom too. So, click the link. I'll see you on the upcoming free virtual online training and do it now because we do have limited availability and spaces on these free trainings. So, click now, reserve your space, and I'll see you on the other