Heritable Bank has urged would-be ‘parent landlords’ to consider whether they buy in their own name or that of their student son or daughter, as the tax implications can vary substantially.
Heritable Bank suggest parents consider the following issues when deciding:
- Long-term ownership of the property: Do you expect to have the house proceeds paid to you when sold? Will the deposit be a gift to your son or daughter?
- Is your student son or daughter sufficiently mature to ensure that mortgage repayments are made on time and to manage rent collection, payment of tax and other house management duties?
- Are you a higher rate taxpayer? Would additional rental income affect the tax bracket into which you fall?
Colin Stevens, head of residential mortgages at Heritable Bank, commented: “With the student population swelling every year, and students struggling to cover the cost of living and studying, it makes sense to many parents to invest in a Buy to Let property for their son or daughter. This not only saves on accommodation costs in the short-term, but could generate a sizeable family nest egg investment over the longer term.
"However, there are important issues to address, which could have a huge impact on how you choose to structure your purchase, and the tax you end up paying.”
