Child off to uni, tax implications if they save parental contribution?

brick

Hi.

Apologies if this has already been asked; if so, please point me towards the relevant thread(s).

My child starts university this autumn, and I would like to contribute towards the cost.

I understand that as a parent I can provide money for likes of uni fees and reasonable living costs without any tax implications.

What is the tax position if my child opted to save said money provided by me, and instead take out a student loan (for equivalent amount) to pay towards fees and living expenses?

Benefit to child would be that:-

a) Their savings could match or beat 1.5% loan rate (am in Northern Ireland, 1.5% at moment - not RPI + 3%).

b) On leaving uni, child would have potential flexibility to use savings as deposit on house... paying off lower cost student loan as opposed to seeking commercial mortgage for saved amount. Assuming that student loan rate undercuts commercial mortgage.

But, I would want everything to be above board tax wise.

Any advice?

greenglide

"Normal" students tend to have the student loan and contributions from parents. Most students then tend to spend both, especially when alcohol gets involved!

The student loan is not income and isnt taxable, neither is the money from parents.

Unless the student has income from employment while studying then it should be very difficult to generate savings / investment income to use the 10.5k tax allowance.

But the capital could decrease the student loan available after the first year? Having said that it didnt for us, possibly because she used the "no change" option in second and third years?

kidmugsy

brick wrote: »

On leaving uni, child would have potential flexibility to use savings as deposit on house...

Aye, or on a round-the-world jolly.

kidmugsy

Anyway, my understanding is that if you gift money to a child for education and maintenance costs while at uni, there's no IHT chargeable on your estate, and of course there's no income tax for said youngster to pay. I don't see any tax implications for you at all. You can't control what the child actually does with the money: a punt on the 3:30 at Kempton for all you or I know.

brick

Thanks for that.

It was the potential for IHT that I was wondering about if I popped my clogs within seven years, but great if that shouldn't be an issue.

organic_wanabe

Our son graduated in June 2013. Our understanding was that we could gift him money to cover Education & Maintenance. We gave him the funds for University Fees/Maintenance, around £21k in total, which he chose to save in ISAs (both Cash & S&S). He worked during Summer vacations and that money paid for his social life/holidays. He now pays off his Student Loan monthly from his salary.

thenudeone

You can gift unlimited amounts to anyone you like in the UK without any tax implications, and it will not count as their income for tax purposes or student loan purposes.

anoncol

Yeah your child will save it rather than party .