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Where Taxpayers and Advisers Meet

I own a student property with my daughter - can she live there rent free

Joined:Mon Nov 05, 2018 10:23 am
I own a student property with my daughter - can she live there rent free

Postby unitopayfor » Mon Nov 05, 2018 10:48 am

Hi all, looking for some help. Im looking to buy a student house for my daughter and 3 friends to live in. The others will all pay rent at the prevailing rate. I am going to gift my daughter enough cash to buy 25% of the property, the rest being owned by myself (50%) and my other daughter (25%) The intention was to split the rental income proportionately. Obviously both my daughters share of the income would be tax free as thay are students and ordinarily, the rent reveived would pay the rental on the houses they are living in. My issue surrounds the rent for my one daughter who would end up living there. As we pay her rent now, it would be riddiculous for us to own the house, I then pay her rent to give back to us then be split 3 ways?? Would she just live there rent free as she co owns in any case and I get 2/3 of rent paid and my other daughter gets 1/3? Im really puzzled by this and would really appreciate some input. Fast forward a few years - when my daughters want to buy their own properties I would simply buy them out giving them the cash for their own deposit. Can you see any flaws with this plan? thanks in anticipation x

Joined:Wed Aug 06, 2008 3:35 pm

Re: I own a student property with my daughter - can she live there rent free

Postby RMC » Sun Nov 18, 2018 8:32 pm

Under the arrangement you describe your student daughter will owner-occupy 1/4 of the house and cannot pay rent to herself. Rent from the remaining 3 tenants should go 50% to you, 25% to your other daughter. If anybody’s rental income exceeds £1,000, they will have to register for self-assessment and pay tax, so keep the rents reasonable.
When you buy out your daughters, the non-student one may have a capital gain to report to HMRC. Although some believe that the property market will stagnate or worse.

A tax-free solution might be you lending money to your student daughter to purchase the house. The loan should be secured on the property. While she lives there the resident daughter would make repayments by passing rents from the tenants to you, with balance being payable when she sells on moving out.
The difficulty here could be your other daughter feeling left out.

The problem with joint owners (or tenants in common) is that they may force sale when not convenient to you.

Joined:Fri May 16, 2014 3:47 pm

Re: I own a student property with my daughter - can she live there rent free

Postby AGoodman » Tue Nov 20, 2018 1:37 pm

RMC's suggestion sounds sensible and probably works in practice but I'm not sure it is strictly correct.

Daughter in residence is not required to pay any rent but I would have thought that any rent paid by the other occupants still has to be split 50/25/25 so that student daughter will receive a share.

This could be just for tax purposes so that student daughter is allocated a quarter for income tax (which she may not have to pay) but she could gift it over to the others.

BTW - I'm not certain this is correct either!

Joined:Sat Feb 01, 2014 3:26 pm

Re: I own a student property with my daughter - can she live there rent free

Postby bd6759 » Sun Nov 25, 2018 1:29 pm

Assuming that the querist is not married to either (or both) of the daughters, there is no requirement for the rents to be allocated in proportion to ownership. They can agree amongst themselves who shall receive what, and each shall be taxed on the amount received in accordance with that agreement.

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