How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Sam Your Own Question
Sam, Accountant
Category: Tax
Satisfied Customers: 14157
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Type Your Tax Question Here...
Sam is online now

My 2 (student)children aged 20 & 22 have given me £32,000

This answer was rated:

My 2 (student)children aged 20 & 22 have given me £32,000 for a deposit on a buy to let property. I will be organising a buy to let mortgage. It's due for completion in Q3 2017.
What do I need to do to protect the children's interest and also what's best from a tax point of view
Customer: replied 2 years ago.
I will be holding the buy to let mortgage.
Property is worth £162,000 and is off plan.
Rental anticipated gross £900/ month. After charges £700 ish.I will end up being a higher tax earner with this rent.
Not quite sure legally/tax where we all stand and hence this preliminary questioning.
Thanks for your question
There are three ways to protect their interests
1) You all three hold the property - but then this would need to be reflected with the lender as well as the land registry and as they are students they will not be able to be viewed as eligible lenders
2) Place the property in trust - but this will not be possible until such time that the property is loan/mortgage free
Finally and most effective
3) just draw up a deed that recognises the loan on said lump sums from each child and the arrangements to either pay back (with or without interest) or what it represents in ownership of the property - and whether this represents a percentage share of the property - and so subsequently a percentage share of the rental income.
A far as the buy to let mortgage is concerned - if the property is seen to just be solely yours then you will declare all the rental income less the mortgage interest from the buy to let loan (which usually sees it as all interest) and any other expenses.
If the lump sum they lend sees then 19% ownership of the property then you can arrange for them to register for rental income receipts with HMRC and they declare their part share (from the overall 19%) of the rental income which may see there small shares tax free (as will be less than £10,600 for each of them a year) and your tax bill being a little smaller.
Once the loan/mortgage is paid off, you can consider whether you gift them a larger share.
Let me know if you have any follow up questions
Customer: replied 2 years ago.
Thanks for your help. Very useful. I'll most likely go down the deed that recognises the loan etc.
helped me clear a few things up in my head.
Thanks for your response
And I am glad to have offered a workable solution for you, please do let me know if I can be of any further assistance on this matter, but it would be appreciated if you could take the time out to rate (or click accept) the level of service I have provided.
Sam and other Tax Specialists are ready to help you