Buying Property for Your Children
Buying a new build home for a child is a great way to care for your offspring’s future. After all, it is not only an opportunity to provide them with housing, help save money and deprive them of worries, but also to teach a child responsibility and independence. Let’s see what options exist for this process to understand which one suits your family.
- Direct purchase of a new home for a child
You buy a house and register it in your child’s name. On the one hand, it is the easiest way for your offspring to get their own home. Until the moment they move in, you can rent out the house and receive money. Sounds good, doesn’t it? But in fact, buying a new home entails a lot of additional costs. In this case, the parents are definitely not the first buyers, so they have to pay stamp duty and capital gains tax upon purchase. Also, in the future, when the child reaches the age of majority, and there is a direct transfer of ownership of the house, this process leads to additional costs, for example, for official registration of papers.
- Cash gift to buy a new build house
Based on the previous option, giving a child money for a house seems like a way out. You can start saving money for this from the early years of your offspring to the day they come of age. But even here, there can be pitfalls.
First, you need to consider the possible inheritance tax that may be levied on donated money from parents. Fortunately, it does not need to be paid at the very beginning, and you may not have to. The reason for the occurrence of this tax may be the premature death of a parent, namely within seven years after the transfer of money. Also, the amount of tax depends on the time elapsed between the receipt of money and the death of a person. That is, in the first years it will be more. After seven years, donated money is not taxed.
Secondly, if you give money to your already married child, there is a risk that someday they will divorce their partner, and the house bought with the donated money will have to be divided between the former spouses. In this way, part of the investment intended exclusively for your child will go to another person.
Buying a house or a cash gift are not the only options to help a child with housing. Instead of giving a large amount of money, you can give your offspring enough money to make a deposit. The great news is that each parent can donate up to £3,000 a year, which is tax-free. In addition, if you did not give money last year, you can add this amount this year. So a couple of parents can donate up to £12,000 a year.
- Choosing the perfect home for your child
You may have already decided what the most suitable housing options are for your child. Whether you choose to buy a property or donate money, finding a suitable new home is also essential. To do this, you can conduct your own analysis of new developments using special online platforms that provide information about real estate and developers in more detail. Such websites contain up-to-date information about residential complexes, images, and floor plans. You should compare suitable options with each other, evaluate the available infrastructure, and read residents’ reviews. This analysis will help you choose the best home option for your child.