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.

@FemaleEngineer if inheritence tax may be an issue then it's better to give her the money sooner rather than later. People will quote Martin Lewis to you, as if he is a demigod, but his advice is starting to look out of date, and was never applicable to all circumstances. If you play with his calculator and apply his assumptions to your own working history, do they stack up? They didn't for me, and I'm not a super high earner, just someone who has changed jobs a couple of times to increase my income above inflation.

Also, to answer your original question, maintenance payments for a child in full time higher education are exempt from inheritence tax: https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04175. The same money gifted as a lump sum for a house deposit is not exempt from inheritence tax (if you die within 7 years).

Student loans were originally structured to encourage young people, including those from low income families, to not see fees as a barrier to going to university. But unfortunately too many universities offered low quality degrees that didn't help their students to get good jobs. It's therefore unsurprising that Martin Lewis tells young people that most are unlikely to ever pay back their loans. But things are changing. The government are defunding universities that offer junk degrees, putting money into apprenticeships, and restructuring student finance so that more loans will be repaid. So it's clear which way the wind is blowing. The Financial Times ran an article last September saying that if you can pay, do.

What Martin Lewis never does is add in the satisfaction gained from something.

We are debt adverse. We gained great satisfaction from DC leaving University with no debt, and free to make choices without an extra "tax" burden. We drive an old car, don't have flash holidays and only decorated the house for the first time in three decades once DS had left FTE. It suited us.

These threads often highlight a gap between London and the rest of the country. Gifting a child a house deposit in London would be huge. We also remember the squeeze years, mortgaged up to the hilt, where the extra "tax" would have had a big impact on our ability to borrow/buy the house we wanted. And should we decide to sell up and move elsewhere, this is where any deposit might come from. Equally are the DC going to live in the UK. I expect both mine to follow my example and spend some of the early years of their career working elsewhere. Deposits suggest that you are first content that the DC is on a mortgage track, and earning somewhere in the middle of very little and an awful lot. And that you get on with them, trust them, like their spouse etc. Somehow it feels better to pay the fees, treat each DC the same, and then once they have finished FTE let them get on with it.

Unless you have particular person circumstances. IHT seems a bit of a red herring here - are planning to die in the next seven years? And if you do, the IHT still has to be paid whether or not you give the money

I’m a tax adviser and there won’t be any tax implications.

The only time there could we tax implications is if you both died with 7 years with a total estate worth more then £650k, so generally quite low risk anyway

The IHT thing is still worth looking at if grandparents have good pensions. We managed to keep my mum out of a care home, which saved a fortune. In her later years DM spent very little as she did not go on holiday or go shopping etc. A big treat was a trip to the garden centre cafe. This meant she lived well within her means. By using spare income to support DDs education, rather than DD have to take out loans, DD will benefit for many years.

The taxman did fine as well. DM did not eat into capital, and all of it would have gone had she paid care home fees, so he got his IHT.