Help your child make money at University

Jonathan-Hook-Norwich-Accountancy-ServicesLet’s assume your (18+) child is off to Uni and you want to give them a hand. A let property can be a great way to do this. Rent a room relief allows someone to rent a room in their main residence and receive up to £4250 p/a tax free. Using this, it is possible for your child to receive up to £13,690 a year free of any tax – assuming they have no other income, so their personal allowance of £9440 is also available to offset against the rental income.

It works like this: you and the child buy a property as ‘Tenants in common’. This enables you to own it in unequal shares, so perhaps you own 90% and they own 10%. Your child lives in the place and lets one or more rooms to fellow students. As the owner, you might think you’re taxable on 90% of the rent. However it is possible for joint owners to agree among themselves how the rent is divided. So you agree (IN WRITING) that it all goes to them.

When the child leaves uni you may decide to sell. Of course you’re up for 90% of the capital gain being applicable for Capital gains tax because it’s not your ‘Principle Place of Residence’ (PPR).

However! – there is also a way around this – instead of owning the property directly; you set up a trust naming the child as a beneficiary. Make sure you specifically give them the right to rent rooms if they wish.

This is gold. But step 1 should include a trip to a good tax advisor. There are many traps and pitfalls and the above is a summary only, and explained in basic, laymans terms.  

Jonathan