Capital Gains: Jointly buying a house with student DC

[lljkk]

One of many options when DS goes to Uni is that he buys a house to stay in for last 2 yrs of his degree course. For deposit He would put in £20k, me & his dad would each put in £20k... we would be guarantors but DS might be able to cover pay the mortgage on income + lodger paying rent, and maybe we'd jointly cover any repair costs. If we don't outright gift the money to DS, what things would we need to do about capital gains when the property was sold? Would we need to declare the lodger rent as income in personal tax assessment, for instance?

I know it's complicated, just trying to start to understand the options. Cheers for any knowledge in replies !

How are you planning to own the house? If it’s in DS’s name only he should be entitled to the benefits of being a first time buyer and no CGT as it’s his only home.

I appreciate you are putting in £40k (plus paying the mortgage) but there maybe other ways of protecting this so you get it back. IANAL but a deed of trust where you are have a beneficial interest rather than owning the property. I think an hour with a solicitor might be worth the investment.

DS would probably need to do a self assessment. It’s worth looking at the rent a room scheme https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

Again an hour with a solicitor would make sure you get it right before you buy,

rental income has to be declaredbut with lodgers, there is an amount you can make that's tax-free i think? so your DS needs to look into that.

it sounds like you need to have your name on it because of the mortgage? Or you maybe allowed to put it completely in his name. Your mortgage advisor should know the answer to this. At least they would've done 20 years ago, I'm not sure what anybody knows now!

If you do that, then he would have to fill in a tax return possibly, but he'll pay less tax than you on that rental income (depends on your income but seems a safe assumption that his is lower than yours ) so it's probably worth doing.

Then, when it comes to capital gains, according to the current situation, he wouldn't have to pay it because I presume it's going to be his only property. At the moment there's no CGT to pay on the sale of the property you lived in. If the labour chancellor decides to change that, then a lot of us will be really pissed off!

for the moment there is no CGT to pay on the sale of your own home.

Also, if your name is on theproperty, you'll be paying extra stamp duty because it will be an additional property for you - that would probably be your biggest cost at the beginning.

I think you need to do everything you can to get it in his name only, but I'm not a lawyer or an accountant or anything so I don't know how you do that. Mortgage advisor used to be really good on this kind of stuff.