Tax Implications

If you are buying a property for your child to live in, as well as to rent to other students, tax-wise it makes more sense to give your child the finances to buy it, rather than purchasing it yourself, as once the property becomes the principal private residence of the occupant, all the rules change; you do not have to pay capital gains on a property which is your principal private residence. This means that if your child’s name is on the deeds you can side-step any capital gains tax for the entirety of their university career, provided they live in the property. Also, as the owner of the property, your child can take advantage of the tax relief given by the “Rent a Room” scheme. This allows a tax-free rental income of £4,250 per year if you rent a room in your principal private residence and share communal spaces such as the kitchen and living room. Giving your child the finances to buy a property is also a good way to soften the blow of inheritance tax. As long as the gift is given at least seven years before your death, it will not be considered part of the inheritance package, so it is an effective way of spreading out your estate. If researched carefully, both benefits and costs with tax exemption make buying to let to students a potentially lucrative option. Your home may be repossessed if you do not keep up repayments on your mortgage. Levels and bases of, and reliefs from, taxation are subject to change. Buy to Let mortgages are not regulated by the Financial Conduct Authority if your child occupies less than 40%. Property Letting Location Rates and Fees