Buying-to-study – how to help house your student offspring
30 Aug 2022
New university terms are just around the corner and young people will be preparing to leave home to attend.
Tuition fee loans are usually available to cover up to 100% of fees but the size of any upkeep loan will depend on household income and very often, it will not cover a student's full cost of living.
Some students will be living in a traditional halls of residence, some will be renting privately. Another option for a few might be purchasing a property. Where resources are available (typically, parental or grandparental resources) this may be an attractive option.
Prospective students buying a property who are 'first-time buyers' and paying less than £300,000, no Stamp Duty Land Tax ('SDLT') will be payable. Otherwise, duty will usually be 0% on the first £125,000 increasing 2% on the next £125,000 and then 5% on the excess. Students do not pay Council Tax.
Any rent received from sharing the property with other students will be tax-free up to £7,500. Anything in excess of that will in principle be taxable (though may be covered by the student's personal tax allowance of £12,570 if there is no other income).
Therefore, a parent who is able to lend the student the full purchase price may achieve the result that the student is not only free of the burden of paying rent, but also has a source of funds to supplement or even replace whatever loans are available. Even if some or the entire price has to be borrowed, the numbers may work out favourably, especially if the course is longer than the usual three years.
Of course, this is not without risk, financial and other.
In a rising market you could expect, on selling the property at the end of the spell in higher education, a gain sufficient to cover transaction costs and to come out ahead, but the present property market is uncertain.
SDLT first-time buyer relief is available to a buyer only once; if it is used by the student on the student property, it would not be available on a subsequent longer-term purchase, later on down the line.
More generally, while some students may dislike life in halls, many others love it; for them, being a live-in landlord may compromise the 'student experience', and some may simply be too irresponsible for it to be contemplated.
For any current or prospective landlords – student or otherwise – we recommend thinking about the short and long term implications. We are happy to help and advise based on your own set of personal and/or business circumstances.