Rental income for student son tax advice please

Aloha90

I am plan to cash buy a property to provide rental income. My son is at University and I want to know if he can recieve the rental income instead of me and avoid paying tax. Also does he need to be on the deeds of the property in order to receive the rent? Are there any CGT implications?

Many thanks in advance.

theartfullodger

Simple!! Transfer ownership to him &, job done!!!!

(But you knew that didn't you...)

Let me guess: You're wanting to find ways to pay less tax so the rest of us have to pay (slightly..) more...

Is that fair??

clutton_2

you will only pay tax on the profit.... if you are a student landlord, you probably wont make any for a few years....

dont forget to investigate HMO regs......

ognum

If your son is to receive the income then he needs to own the property so it does need to be in his own

The income is then his, he needs to declare it for tax purposes to needs to do a self assessment tax return to HMRC whether or not he is over the tax threshold he still needs to declare his income. he needs to keep detailed accounts of income and expenditure on the property.

How many rooms is this property going to have, if it is an HMO then he need to be aware of all the rules of an HMO. If he is taking deposits he needs to lodge them in an approved deposit scheme.

If it is just one person staying with him he could be a lodger and the room could be let under the rent a room scheme.

You child should be aware of the implications of being a landlord, all the gas safety checks needed and the legal implication. Not many students are good at this but if the house is his it is his problem and the legal implications fall to him.

there are no CGT implications if it's his property and he lives in it. be aware that once you have given something to someone it belongs to them, if he decides to sell it and head around the world that is his right! But I'm sure he wouldn't would he!!!!

dimbo61

If you buy a property for your son to live in and also take in a lodger to help with the bills you can do that.
Now you can own this and charge your son nothing to live there BUT not sure how the HMRC would feel about a lodger in the house/flat.
Now if you buy a 3 bed flat/house and have 3 unrelated people renting the place it may well come under HMO and you MAY ! need planning permission in many student towns/cities so check with the council before you buy.
EPC, gas and electric safety checks, smoke alarms, ETC to consider

drummer_666

yeah if you just want your son and one other person to live there, they can both be lodgers. your son not paying you anything and the other lodger paying.

as others said you still need to declare the income from the lodger, but you get just over £4k tax free.

BitterAndTwisted

Owning a property and having someone else receive the rental income is tax-evasion. The penalties for which can be swingeing, so is most defintiely to be avoided.

You can buy the property and gift it to your offspring but that could bring risks of its own. Things which are given to us with no strings attached are rarely valued as highly as those we have worked hard for ourselves.

Another factor is why you would want to continue to own a property with all the responsibilities of being a landlord once your child has left university and no longer has any ties there. You are not likely to see a huge increase in equity over a period of only a couple of years and once you've factored in the costs of buying, maintenance, repairs, tenancy agreements and then selling again it may not look like a realistic commercial venture either.

System

Not forgetting that the income will also affect his student finance.

sirmosh

drummer_666 wrote: »

yeah if you just want your son and one other person to live there, they can both be lodgers. your son not paying you anything and the other lodger paying.

as others said you still need to declare the income from the lodger, but you get just over £4k tax free.

Not unless the owner also lives there. They would have to be tennants.

00ec25

dimbo61 wrote: »

If you buy a property for your son to live in and also take in a lodger to help with the bills you can do that.
Now you can own this and charge your son nothing to live there BUT not sure how the HMRC would feel about a lodger in the house/flat.

very simple HMRC would not recognise them as a lodger since the owner is not resident therefore they are not a lodger, they are a tenant

drummer_666 wrote: »

yeah if you just want your son and one other person to live there, they can both be lodgers. your son not paying you anything and the other lodger paying.

as others said you still need to declare the income from the lodger, but you get just over £4k tax free.

LOL - as others have said you "advice" is wrong - the rent a room scheme only applies to resident landlords (& for resident read - shares basic facilties with you, not someone living in sepaate self contained flat in the same building) .

OP
if you own it solely in your name then all the rental income is yours only and you account for it on your tax return. You will also be exposed to CGt when you sell it

if you buy it and transfer it 100% to your son's name then he is laible for income tax on the rental profit in his own name but not CGT for as long as he lives there as his main home - when he moves out but does not sell up then he also will become CGT liable

Kynthia

You and your son could jointly own the property. Then if he is living there as an owner he would not be your tenant and you wouldn't have to declare his contributions to the household running costs. He could then take a lodger or two, but not giving them exclusive possession of their rooms. Then he would declare this income to the HMRC but with rent a room relief he wouldn't pay much/any tax. Also lodgers don't have ASTs and therefore have less rights and you can ask them to leave without going to court.
You would need to decide on whether you wanted your son to partly own the property and see whether the mortgage company would allow it. You can have a Deed of Trust that legally specifies what percentage you each own.
I'm not an expert though so you'd want to check this out with a solicitor.