Key benefits of buying a flat for your student son or daughter

Between The Lines John Moran

Now is the time of year when future students and their parents start thinking about where they are going to live during their studies and how much this will cost.

As well as fees there are books, travel, toiletries, food, accommodation, utilities and pocket money to shell out for.

While many students take out loans to help pay for their expenses, it is usually the parents who bear the brunt of the costs. They are expensive things, students, especially if you are a higher-rate taxpayer, but there are ways to help pay for their expenditure and save on tax.

Students traditionally stay in university halls of residence or rented accommodation, which is all money going out with no return, but you can purchase a property for your student son or daughter to live in, plus generate additional income by letting out a spare room or two to other students, which will help pay for the cost of purchase.

Meanwhile, the student will not need to pay rent and the flat will presumably be going up in value all the while.

If the father retains ownership of the flat, then he will pay tax on any rental income at his highest rate, but if he gifted a proportion (or all) of ownership to his daughter, say, then an agreement could be structured so the rental income could go to his daughter who, being a poor student, is unlikely to be liable for any tax at all.

As an added bonus, the father can save on the financial support he would normally be paying her while she is a student.

A further advantage of letting out rooms is that £7,500 of the rental income is free from tax anyway, under the Rent a Room scheme. And if the flat has been the daughter’s main home throughout the period of ownership, then it will be exempt from capital gains tax.

Buying property for your student son or daughter, especially with joint ownership or as a gift, is an option parents should consider if possible, as it can be the most economical way to support your child. Students are also far more discerning now in the level of luxury they expect. They don’t want scruffy digs with dodgy decor. Regulation around the private rental sector has increased significantly to guard against “slum landlords”, which has greatly improved safety and standards for tenants. l John Moran is managing director of Grant Property