With the new Academic year right around the corner, many parents are getting ready to send their child off to University. How can you help?
A few things to consider first when your child leaves for university are;
- Your child is no longer classified as your dependant, so your council tax/housing benefit may go up or down
- You are no longer eligible for child benefit or tax credits for them
- Students are not exempt from paying taxes. Students have a personal allowance of £12,570 a year before tax needs to be deducted.
Buying a house?
Buying a house for your child can have benefits for both of you. First of all, you could provide free accommodation to your child, or if you decide to charge rent they still can have subsidised living costs. You may also make money from this in the future when you decide to sell the house after the child finishes uni.
Buying a house in your name
Rental income will be taxable on you. The rate of tax can be as high as 45% depending on your other income. If you decide to sell the property, you will be subject to capital gains on the growth in the value of the property during the period you owned the house.
As you are purchasing in your own name, 3% Stamp Duty Land Tax second property surcharge is likely to apply.
Buying a house in your child’s name
Your child will not be subject to tax on rental income received from their flat mates. As they have lived inside of the house, if they decide to sell they are entitled to the capital gains principle private residence relief.