Bank of Mum and Dad!

6th September 2017

 

A parent with spare funds to invest may like to consider purchasing a property for their student son or daughter to live in whilst at university, in order to save on student accommodation costs.

 

We recently advised a client that, so long as their son or daughter lives in the property as his or her main residence,  they can let out furnished rooms and take advantage of rent-a-room relief. This means the student can receive rental income of up to £7,500 a year completely tax free, regardless of any other income they may receive.

 

The main point to highlight here is that the student does not have to own the property – the parent(s) could retain control and continue to own it, letting their student son or daughter occupy it as their main residence. The student can then in turn let rooms to friends and use the rent received to fund his or her living costs at university, without relying on the bank of mum and dad!

 

If the rental income is more than £7,500 per annum, the taxable profit can be calculated under the rent-a-room scheme by deducting £7,500 from the rental income and taxing the remainder. Alternatively, the profit can be worked out in the usual way if this is more advantageous.

 

Care needs to be taken as if the parents receive the rental income, rent a room relief would not be in point and the usual tax rules would apply. Please contact our property investors group or your usual Whiting and Partners contact for further advice.



 
Other items in Blogs
 
Jaimie King
13th August 2019 Charity accounts assurance

Whether unincorporated, a charitable company or a CIO (charitable incorporated organisation), charities are required to have certain levels of assurance over their financial statements depending on their size. The limits are much smaller than companies, meaning that many charities require some sort of external scrutiny. The requirements by size are as follows: Income up to…

Read More »

Nick Edgley
24th July 2019 From April 2020 – 30-day Reporting and payment date on residential property disposals

From 6 April 2020 the Government is making some significant changes to the rules regarding the reporting and payment of Capital Gains Tax (CGT) when individuals, trustees and personal representatives dispose of residential property and it is important to be aware of these.   Currently such a disposal would be reportable on your tax return…

Read More »

Jodie Tarbin
23rd July 2019 Residential Property Tax News!

  Lettings Relief and Principal Private Residence Relief   Following my previous blog regarding the changes announced to the Principal Private Residence Relief (PPR) and lettings relief rules, the consultation period ended on 1 June 2019. You can view the consultation responses here.   HMRC have now published a policy paper on 11 July 2019,…

Read More »

Fiona Mann
22nd July 2019 Exam Success – World Beating Results!

  We’ve had some extraordinary exam results over the last few days – staff at Whiting & Partners have excelled themselves. Luke Bacon from St Ives office has achieved an outstanding result of 99% for the Financial Accounting and Reporting exam – coming joint first in the world.  This result has been recognised by the…

Read More »

Matilda Mawson
19th July 2019 Changes to Entrepreneurs Relief from 6 April 2019

Entrepreneurs’ relief allows a reduced rate of capital gains tax on disposals of all or part of your business assets. The reduced tax rate is 10% on up to £10 million of lifetime gains. There have been a number of significant changes to entrepreneurs’ relief in the last year, tightening the rules on qualifying conditions…

Read More »

Ernesta Petkeviciute
19th July 2019 New SRA accounting rules – what’s changing?

The current Accounts Rules are made up of over 40 detailed requirements, making it difficult for firms to fully understand what is required of them, as well as giving firms no flexibility to adapt them to their own practices and decide how best to look after client’s money.   The new rules coming into effect…

Read More »