Can parents pay uni hall fees direct & tax rules

[FemaleEngineer]

DD is (hopefully) going to uni in September. She's going to take the loan for the course fees and we're considering whether to pay her maintenance fees ourselves (appreciate we are fortunate to be able to do this).

My question is - would we have to transfer money to DD for her to onwards pay hall fees? Or can we pay ourselves directly? And would there be a tax implication for us either way?

DH thinks he read somewhere that we are ok to gift DD money so long as we can demonstrate it's from our monthly salary. (Ie not a larger lump sum). I'm struggling to find info on student finance pages. We're in England.

We pay 18DS hall fees direct, he lives on his loan. This seems a reasonably common arrangement. No idea about tax.....

My DCs only get the minimum loan so we pay for their accommodation. First year in halls we just pay direct to the uni by way of direct debits. Once in private rental we have a monthly standing order to DC account who then pay their own rent direct.
Not aware of any tax issues. Government expects parents to support children if not receiving full loan amount - seems a bit unreasonable to then tax them on top!

We paid 3 x DC halls fees ourselves and they get the student loan to live off.

That's the same arrangement as everyone we know.

unless you know your daughter is going to be a very high earner and therefore will pay off her loan there’s no point in her not taking the maintenance part. Once she graduates it will come out of her salary at the same rate regardless of how big the loan is.

Youd be better saving that money and giving it to her post graduation as a house deposit. That will make a much bigger difference to her finances going forward.

Both university living fees and house deposits can be gifted without tax implications.

We just transfer his term's maintenance once every term, and he then pays his college bill when it arrives, and lives off the rest.

I don’t really understand why you’d see this as ‘gifting’ your DD money. You’re just supporting your child (and as PPs have said, pretty common that parents pay halls direct).

Oh, and no idea about tax, sorry!

Can you clarify the tax question? Are you asking jf your child would be taxed on the money you give her? Of course not.

Are you asking if you can have the gift as tax deductible? Also no.

I don't think gifts out of excess income is relevant here - if that's what you're asking (inheritance tax).

All you are doing is providing financial support to your child.

We pay the equivalent of the maintenance loan and dc take loan for fees. No tax implications implications as far as I’m aware

Thanks for all you prompt responses and sorry for not being clear!

I did suggest to DH that DD might be better off going for the max maintenance loan she can have and us separately saving for a house deposit for her but he thought that wasn't the best idea?

I doubt DD will be a very high earner. But the thought of paying 9% tax over £25k for 40 years would've put me off at her age!

Can the government/loans company retrospectively chance the rules once you've taken out the loan? Trying to work out the potential risks.

*change

I think for the old style loans it made more sense to take the loan but with the changes now and the repayment length and interest rates i think it’s kinder to pay if you can. As you say 9% tax for 40 years feels like a lot.

But she will have almost £30k in fees anyway so the additional loan amount on top won't make a difference to her. The hardest thing they will face is getting on the housing ladder. You could start at LISA account now for her, you put in £4k and government then adds £1k to that pot. You do that for 3 years she will have a £15k deposit plus (working on Ds's LISA 3.5% interest) accrued interest.

The tax thing is she won't have ever known anything different. Have you run salaries through a salary calculator and seen what they pay per month? On £28k they pay £2 per month on student loans. On £30k she would pay £17 per month. Why would that put you off?

https://www.thesalarycalculator.co.uk/salary.php

tick plan 2 for the current student loan to get figures. At no stage did debt/tax put me off doing my degree. It opened doors for me even though I didn't carry on in my degree field.

Also have you watched Martin Lewis? It is 3 years old but worth a watch

I doubt DD will be a very high earner. But the thought of paying 9% tax over £25k for 40 years would've put me off at her age!

Unless you're also paying all her fees she's still going to be paying that rate.

Can the Gov change things retrospectively? Technically yes. Will they - no - far too politically dangerous. That's why the 40 year term applies only to those starting this year, and not previous cohorts.

No tax implications. Is there a reason not to pay her the equivalent of rent for her to pay as and when required? If she is not a high earner she will probably never pay her loans off. Parents certainly can pay hall fees abs private rent direct.

I've done some research and it looks like:

If a child is in full-time education, parents can pay for rent, tuition fees and maintenance without there being any Inheritance Tax implications. Note that the amount needs to be reasonable.
In addition everyone can give away £3,000 each year, to whomever they like, without any tax implications (the annual exempt amount). In our case we can transfer some extra money annually to DD to save for a house deposit and hope she doesn't spend it on something in appropriate as we won't be giving her any more!

Thanks for your responses they were very helpful. Now need to make the loan application asap as school have advised they can take a while to process.....

If you persuade her to put in a LISA she gets a 25% top up from the government and can only spend it on a house deposit or in retirement.

She makes the loan app not you. It’s her commitment

In our case GPs paid. Not sure of exact rules but lawyers did the probate and there seemed to be additional gift allowances for paying for education. So it reduced the IHT burden and GC leave university without debt.

Ime the loan application is pretty straightforward, think your school is just wanting it out if the way. Has your dc confirmed their offers on UCAS

"Regular payments from your taxed income: You can also give a child or grandchild money by regularly contributing to their living costs or expenses out of your taxed income. But for the child or grandchild not to pay tax on the gifts, the pattern of giving must be consistent - such as monthly gifts to pay a child’s rent or a grandparent paying school fees - not sporadic. Additionally, the money needs to be from your surplus income. You must be able to prove to HMRC that gifting the money doesn’t affect your standard of living. This is to ensure people don't hand money over to their children to avoid it being taxed"

I don't know how they define sporadic. I give my university age DC money at the start of each term (which is the same pattern as a grandparent paying school fees)

@Norwichknowall I'd not head of a LISA, it sounds a great idea, thank you.

DD has all 5 offers and just deciding which to go for. I'll share with her this thread so she can understand funding options. Tax rules seem deliberately vague and confusing but it sounds like we won't be breaking any rules by paying her maintenance and a bit extra for her to save. She has a part time job as well to top up for any extras.

She will pay the same back per month whether she borrows £10000 or £100000 as it's a percentage of her salary. If she's not likely to be a high earners you'd be crazy to pay her maintenance loan.