Purchasing property for 10 year old

joshp1993

If a child is earning income as a result of money gifted to them (e.g. interest on cash gifted from parents or rental income) it would still be taxed as if received by the parent - the child doesn't have their own PA and income tax bands.

Even if it were possible to put a property in her name - why not just put it in yours and gift it down the line?

AnotherJoe

joshp1993 wrote: »

If a child is earning income as a result of money gifted to them (e.g. interest on cash gifted from parents or rental income) it would still be taxed as if received by the parent - the child doesn't have their own PA and income tax bands.

Even if it were possible to put a property in her name - why not just put it in yours and gift it down the line?

Because they would be stealing from the child ( building society account ) in order to buy themselves a house.

Cakeguts

The other problem I can see with this "good idea" is that you are supposing that your daughter will have the same wish to own property that you have. There are a fair proportion of young people now who choose not to buy their own homes because they can rent something far better than they can afford and they can move quickly if they want to. These people have grown up with the internet and phone apps and they like to book something that is instant like a rental property and not wait the 6 months required to sell or buy.

onwards&upwards

Your child’s money burning a hole in your pocket eh? Tempting you just sitting there.

Don’t steal from your kid!!

qwert_yuiop

SunnyCat wrote: »

It's frequently easier and a better return to invest in socks and shares.

I invested in socks, but they all wore out eventually.

Anyone old enough to remember a business genius who came up with the novel idea of selling socks through a shop called - yes - sock shop? After wild share price rises, it went bust. A darned shame.

Mr_Jones

onwards&upwards wrote: »

Your child’s money burning a hole in your pocket eh? Tempting you just sitting there.

Don’t steal from your kid!!

Very nasty thing to say out loud without knowing my intentions. Shame on you.

00ec25

"you" would need to pay for professional legal advice to do this

1. a trust will need to be established with the minor as the sole beneficiary
2. the property will need to be purchased in the name of the trust
3. the trust will need a mortgage to fund the purchase - did your meeting with the mortgage adviser get that far ? (is the mortgage adviser formally qualified to advise you?)
4. the trust will have income (rental profit) so the trust will need to make annual tax returns
5. there are significant tax rules around buying a property "in trust" and even more when selling

if you are serious about this then do A LOT MORE research and pay for proper advice as taxation of trusts is a specialist area

xylophone

How did the child come by what appears to be a substantial sum of money?

Did you give this money to your child?

If so, are you aware of the "£100 rule" in respect of interest arising on these funds?

https://www.thisismoney.co.uk/money/experts/article-4025172/Can-save-money-child-s-saving-account-better-rate.html

If (as seems more likely) the money was a gift/bequest to the child, the rule does not apply but wherever it came from the child is the absolute beneficial owner of the money and you are only a "bare trustee".

If it was a bequest under will trust, what powers of investment were granted?

The child cannot legally make a loan to another person and you are not entitled as her trustee to borrow those funds for yourself.

The child cannot own real estate in her own name.

If there were enough money held in her own name to buy a property, the property would have to be held in bare trust for the child - the child would be the absolute beneficial owner of the asset and of any income arising - this would be taxable income and HMRC would need to be advised.

AS the child would have a beneficial interest in the property, this would lead to loss of FTB status - it would not be the child's PPR so CGT questions would arise on sale.

It appears that there is not enough money held by the child to buy a property outright.

The Trust would therefore need to borrow to buy a property.
Presumably the idea would be that the rental income would cover the repayments but what would happen in the event of voids?

Would the Trustees need to borrow from themselves as private individuals to meet the costs, thus creating a debt for the Trust?

If you have the powers of investment of your child's money, and there is a substantial sum involved, you would be better taking the advice of an IFA if you do not feel qualified to make such decisions yourself.

Davesnave

onwards&upwards wrote: »

Your child’s money burning a hole in your pocket eh? Tempting you just sitting there.

Don’t steal from your kid!!

Mr_Jones wrote: »

Very nasty thing to say out loud without knowing my intentions. Shame on you.

While it isn't right to make accusations without evidence, it's likely O&U was voicing thoughts many others of us were having silently., because despite being anonymous, you did not explain how the child came by the money.
That's important, as xylophone has explained.

As they say, 'The road to hell is paved with good intentions,' so you need to work out the best options for your child and you.

steampowered

Please understand that, while you are well meaning, this is a really bad idea.

Even if it was possible - which it's not. A mortgage lender is not going to accept the property being owned by someone different to the person who takes out the mortgage.

Here are a few reasons:
- When your daughter buys her own property, she would lose all of the benefits associated with being a first time buyer, such as first time buyer stamp duty relief.

- When your daughter buys her own property, she would need to pay the higher rate of stamp duty.

- You would be subjecting your daughter to the legal responsibility of being a landlord and doing tax returns.

- Leveraging up your daughter's money with mortgage debt is an irresponsible thing to do. What would you do if there were void periods or interest rates went up - at which point the mortgage would no longer be covered?

- Unnecessary capital gains and income tax liabilities for your daughter.

It's a complete nightmare. Please open a Junior ISA and invest the money in a stocks and shares fund instead. Much lower risk, much better returns, much more tax efficient, doesn't damage your daughter's attempts to become a first time buyer when she is older.