Putting your kids on the property ladder

Many people worry that their children will never be able to afford to buy a home, not without some help from Mum and Dad.

So, what are the tax implications of giving them a helping hand?

If they are aged 18 and above, the simple option is to make a gift of the deposit. You can provide a guarantee to the mortgage company. The gift of the deposit will be brought into the inheritance tax computation, but only if you die within seven years of making the gift.

If the children are under 18 the easiest option is to buy the property yourself (or yourselves, husband and wife together) and to gift it to the child when they become 18. There will be capital gains tax (CGT) to pay, if the property has gone up in value since you bought it. CGT is charged currently at up to 28%. The first £10,600 of gain per parent is exempt, and it is possible to give away a proportion of the house over a number of years. Although bear in mind the value of the property could go up, as you wait for another year to go by!

Perhaps a better option is to purchase the property in the first place with the child as beneficial owner, and the parent(s) as legal owner. This can be done with a simple declaration of a bare trust (held in the parent(s) name on behalf of the child. It is wise to get a solicitor to draw up the paperwork for this. This might make it more difficult to obtain a mortgage, a good broker should be able to help.

If the property is let, the income will be assessed on the parent(s). There is a way around this, if someone other than the parent(s) can provide the deposit, for example perhaps grandparents. Warning, do not think you can ‘give’ the deposit to someone, who can then give it to your child, this would be fraud!

Another option would be to set up a trust for your child or children, which could buy property. This is a complicated area, and professional advice is required.

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