The cost of accommodation is probably the biggest financial
burden for any student. If you can provide funds to buy a home near
the University the annual maintenance to your off-spring can be
reduced and the property should generate a tax free profit by graduation.
The home can be purchased using a University is loan secured on
your own home, or with expensivel capital provided directly by yourself.
In either case the property must be transferred to the adult student
to allow him to take advantage of the capital gains tax exemption
for his own home. When the home is sold you can recover your capital
from the proceeds, backed up by a charge on the property deeds.
If you wish to give the capital without strings attached the gift
will only be subject to inheritance tax if you die within seven
years of the transfer.
If the property is in a designated disadvantaged area you may
be able to save stamp duty on the purchase.
The student can generate up to £4,250 tax free income per
year by letting rooms to friends under the rent-a-room scheme. Any
excess rent above this limit is taxed but may be covered by the
student's personal allowance of £4,615. If there are only
students living in the house there is no council tax to pay on the
Rather than supplying regular handouts to keep the student in
books and beer during term time, consider investing capital in your
child's name at the beginning of the course. Such a gift will transfer
income and gains normally taxed at 40% in your hands to be covered
by the student's capital gains exemption of £7,900 and his
lower income tax rates of 10% and 22%.