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TaxationWeb by Kate Stephens ACA, ATII

STUDENTS! What tax planning possibilities are available to you and your parents in respect of owning property while you are a student? Tax specialist Kate Stephens ACA ATII of tax advisers Forbes Dawson outlines some tax saving ideas.Given the state of the UK housing market investing in a house for you to live in while studying could be an attractive proposition. You can also earn a certain amount of income tax-free from renting rooms in your home.

This article outlines the possibilities available for students and their parents to consider in respect owning property while you are a student.

The rules are quite complex and specialist advice should be taken for your individual circumstances.

Owning Your Home

Your parents could give you the funds to buy a house.

Generally when capital assets are sold they are subject to Capital Gains Tax (which can be at a rate of 40%). There is, however, an exemption available to everyone that means that no tax will be payable on any profit you make when you sell your home, the Principal Private Residence (PPR) exemption.

PPR is available to owner-occupiers of homes. The PPR rules are fairly complex and should be looked at in detail for each individual’s particular circumstances. Generally though it is available to you if you own the property that you live in or it is owned by a Trust set up for your benefit.

The house can then be sold at the end of your course and you could realise a tax-free profit (you could, of course, continue to live in it if you wanted).

Care needs to be taken to ensure the gift of funds from you parents is effective for inheritance tax purposes and you should take into account the stamp duty costs of buying the house.

Receive Rents from your Friends Tax-free

Usually when you receive rental income from a property it is taxable.

However there is a relief available if you live in the house and other rooms in it are rented out (Rent-a-room Relief).

Provided the rent you receive is below £4,250 per tax year (6 April to the following 5 April) you will not need to pay tax on it.

Further Advice

This area is complicated and you should get professional advice before going ahead with anything mentioned on this article.

There is further information and articles on our website www.taxationweb.co.uk.

If you have specific queries and would like professional advice on any aspects of student taxation or tax efficient ways for your parents to fund you through your studies then please contact Forbes Dawson on 0161 245 1090 and ask for Kate Stephens or Naz Majeed.