Concessionary Purchase
Concessionary purchase describes when you buy a property from a family member, often mum and dad, for less than the property's current market value - it is also called a transaction at undervalue. You can buy any amount under the current market value of the property.
You could buy from someone who isn't a family member for under-market value, but it is rare because it wouldn't be expected to receive free money from anyone who isn't connected to you through your family. In such cases, you need a deed to confirm the gifted deposit.
The saving is often thought of as a gifted deposit; however, unlike a normal gifted deposit, there is no money changing hands, and the actual price being paid is the concessionary price under the market value, not the actual market price. If it is your mum and dad's property, then you should read this article next: Can I buy my parents' house under market value?
Concessionary Purchase Pros and Cons
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Get a Fixed Fee quote today for a gifted property transfer between family. We can help whether it is a zero consideration transfer or a discounted concessionary purchase.
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In this article, we explain the conveyancing process to transfer a property under market value, the costs, including what stamp duty is payable and how long the process takes.
The difference between a Concessionary House Purchase vs. a Gifted Deposit
A concessionary purchase differs from a gifted deposit because it allows someone to buy a property at market value using a gift from their parents.
For example, if you have a gifted deposit of £50,000 from your parents to buy a £500,000 property, then you'll obtain a mortgage for the £450,000, and the full purchase price in the contract is £500,000. A concessionary sale is different because no actual gift is given, so you obtain a mortgage for £450,000, and the price in the contract is £450,000.
It may seem unclear, but the easiest way to understand this is if you are physically paying the money, it is a gifted deposit. It is a concessionary sale if you are not paying the money but benefit from buying under market value.
It's strongly recommended that you take advice from an independent mortgage broker if you are considering a purchase under market value because not all lenders offer mortgages for them, and conditions may vary.
You should additionally instruct solicitors with concessionary experience to carry out the conveyancing because aspects such as stamp duty and the independence of legal advice for seller and buyer must be handled correctly, given that a property is being sold for under market value.
What is concessionary?
A concessionary purchase is a transfer of a property under its market value that would be achieved if sold on the open market in an arm's length transaction. For example, your parents have a property valued at £200,000 that you'd like to buy, but you don't have a deposit, and your salary means you can only afford a £150,000 mortgage.
Your parents can help you by offering to sell you the property for £150,000 if you can get a concessionary mortgage for this amount.
When was concessionary purchase introduced?
A concessionary sale has always existed, so it isn't new. The main reason for a transfer under market value is to allow a family to keep their property within the family while allowing the younger generation to get onto the housing ladder.
What is the concessionary purchase process?
You can go two routes, depending on whether you are paying some consideration or not. The processes for both are:
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- 2
We handle both types of transactions, so call 0333 344 3234 (local call charges) or email help@samconveyancing.co.uk today to get a quote.
What are the tax implications of a concessionary purchase?
Do you pay stamp duty?
Stamp Duty is payable on the consideration stated within the contract of sale, not the property's actual market value. This allows you to save on tax while transferring property between your family. For example, if the property's current market value is £500,000, but you are only paying £250,000, then you pay stamp duty on the £250,000.
An issue can arise when getting a mortgage on a concessionary purchase because your mortgage offer must state the property is being sold under market value. Some mortgage lenders will require you to treat the discount as a gift and state the full market price in the contract; thus, you must pay stamp duty on that figure.
Speak to a concessionary purchase mortgage advisor to ensure you pay less stamp duty.
Do you pay capital gains tax?
Suppose the property isn't the seller's principal place of residence (HMRC have a test for this) and the disposal of the property is to someone connected to the seller (like your mum and dad). In that case, capital gains tax is payable on the full market value, not the consideration stated in the contract of sale. Read more - Capital Gains Tax on Gifted Property
Do you pay inheritance tax?
The discount under the market value is considered a gift for inheritance tax.
| Number of years before death | Rate of IHT on the gift |
| 0 to 3 Years | 40% |
| 3 to 4 years | 32% |
| 4 to 5 years | 24% |
| 5 to 6 years | 16% |
| 6 to 7 years | 8% |
| 7 or more years | 0% |
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
