Should i buy house in Daughter's name?

VJsmum

Hi

My OH and I are about to put an offer in for our 3rd BTL. The first two are in my name as I paid less tax. However the income from those houses, plus my salary, plus a little other income is likely to push any income from this house into the 40% bracket.

We are buying as pension security for the future - I would rather the money was in bricks and mortar than sat in the bank doing nothing.

We were wondering about registering the house in our 17 year old DD's name. is that possible? legal? ethical? dangerous? we also have a 14 year old son.

Anyone have any advice?

anselld

Well, she would own the property and receive and pay tax on the income, so if that is what you want then yes, it is possible.

If you just want to stay out of the 40% tax bracket why not invest in an actual pension?

duchy

You could but it would be HER house -so if she decided further down the line she was going to live in it....rent it out and keep all the rent or even sell it-there would be absolutely nothing you could do. Doesn't sound like a very reliable pension plan to me.

She would also end up paying tax on the income as mentioned so you'd be pushing her into a higher tax bracket before she is earning an amount to justify it. Frankly all the tax advantages would be yours and all the disadvantage hers. Whilst she is still at home it's maybe not a bad thing but if she goes off to university or moves away that income will be taken into account...for student finance......for housing benefit, unemployment benefit .....either leaving her out of pocket or beholden to the bank of Mum and Dad for far longer than is considered either normal or healthy.

I presume this is a cash purchase as no lender is going to give a mortgage to you and allow you to transfer the ownership to your daughter as they'd have no security on the loan.

(Finally -I *think* you have to be 18 to own property -under 18 would involve trusts)

Doesn't sound very workable on a variety of levels.

Prothet_of_Doom

I am yet to invest in a BTL, but it will happen. The money for a deposit is sitting in my business account, owned by my LTD company.

If I go this way, the Ltd company will pay corporation tax on the profit, of 21% or 20%, but I don't have to take any out at all. I could pay my daughter to manage the property, and make her a part time employee of the business, and pay the correct NIC and PAYE for her.
I could also leave the money after Corporation tax in the business, and not draw it as salary or income, and just save it for my next deposit on BTL -

Obviously obtaining a mortgage for a BTL via a LTD company is slightly different, but I've solved your ownership issues and tax issues in the medium term.

Mattygroves2

You have to be 18 to own property so it won't work until she is 18 at least. If you're buying cash then if you're prepared to accept that the property and income would be hers and for her to do what she will with it then it could be a useful way of avoiding IHT in the future but giving her a lump sum towards her own home might be a better use of the money.

If you need a mortgage to fund the property purchase then unless she's got a good income from elsewhere she is unlikely to find it easy to get the necessary finance as it would all have to be in her name. Is she ready to be a landlord at that age with all the responsibility that brings ?

VJsmum

Thanks - that is what I thought. she will be 18 in July so too late for what we want as we wish to buy it now.

Also, thanks Prothet of doom for reminding me that the setting up a company was our other option

I work as a teacher part time, I also provide private education services (sounds dodgy, but isn't) so I guess I could set up a company to cover both areas (especially as the education services are construction based).

Thanks for the quick replies - I certainly don't want my spendthrift daughter getting hold of that amount of money :rotfl:.

duchy

I notice your daughter has aspirations for an acting career so at some point or another is likely to need to claim JSA the business been what it is -Having (on paper) a rental income would financially impact on her unless you are planning that she receives the investment income.

duchy

VJsmum wrote: »

Thanks for the quick replies - I certainly don't want my spendthrift daughter getting hold of that amount of money :rotfl:.

If you don't want her getting the income then it could be classed as tax evasion or avoidance ... sounds unworkable as well as dishonest.

For me it falls into the same catagory as couples claiming to live apart for benefit purposes.

VJsmum

point taken, I certainly don't want to do anything dishonest.

harrys_dad

Earn the money and pay the tax. Who do you think pays for all the services you use?

Prothet_of_Doom

harrys_dad wrote: »

Earn the money and pay the tax. Who do you think pays for all the services you use?

Earn the money and pay an accountant for good legal tax planning and then pay the tax you are due.

Talk it over with a professional. I've given one option, but it may have long term issues I've not thought about. :beer: