If you have a member of your family who will be leaving home to go to university or college, then acquiring a house or flat can, if dealt with appropriately, present significant tax saving opportunities.
Your child could let their rooms in the house or flat to other students. The income received is taxable but expenses incurred can be offset against this. An apportionment of all costs will have to be made to account for your children's own proportion of the costs.
Alternatively, if it is a smaller flat or house, using the provisions of the ‘Rent a Room’ scheme, the first £4,250 of rent received from 'lodgers' in each year is free of tax. Any sum over this amount is taxable in full.
If purchased by the student, the property will qualify as their principal private residence, and if sold within three years of the student leaving university, the disposal will be free of Capital gains tax. Some lenders may provide a mortgage to a student if their parents act as guarantor.
General Residential Buy to Lets
Under this circumstance, you would buy a property to let to individuals or to a family under an assured short-hold tenancy. This may be managed by an agent or you could do the management yourself. In each case the excess of rental income less allowable expenses would be taxable.
Commercial Buy to Lets
Under this arrangement you would buy a commercial property with a view to leasing the building to a business for an extended period of time. There are a number of ways in which this type of investment can be structured and managed.
Please contact us for more advice in this area.