If your help is a loan or investment then you should safeguard this. The best way to do this is to have your solicitor draw up a legally binding agreement. This will stipulate the nature of any agreement.
There is always a chance your child will go ahead and sell the property without your knowledge, even with a legally binding document in place. So this does not happen and the property cannot be sold without your permission, you need to complete HM Land Registry form RX1.
Also remember to regularly update your will if you do decide to take on a percentage of the property. This will reflect what you would like to happen to that stake in the event of your death.
Tax liabilities - When you purchase a property be prepared to pay a large amount of tax. It is not easy to foresee how it is calculated and what tax you would have to pay on an investment, loan or gift.
Inheritance tax - If you give your child any cash, your child will not have to pay any income tax, at the time you give it. You will however need to be aware of any implication on the inheritance tax position.
Any gift that you do make during your lifetime, as long as you survive the gift by seven years, will be free from inheritance tax.
Capital gains tax - If you are thinking about investing in your child's property, than another tax you must consider is capital gains tax (CGT). This is only a factor when you come to sell the property. As your child's property is not your main residence, capital gains tax is imposed on any profit you receive from the sale of the property. This would only come into affect when you exceed your personal exemption limit, which for the current tax year is nine thousand six hundred pounds.
For example, if you invest ten thousand pounds in your child's home, and this equates to 20 per cent of the property, you may be liable for tax on 20 per cent of the profit made.
Do not think you can avoid capital gains tax by giving your share away or selling the property for less than the market value, as the house would be your child's main place of residence they would be exempt from capital gains tax.
Any money you loan your child to purchase a home would be seen as a debt against your estate until it is repaid in full. However, any interest you charge on the loan counts as your income and is also taxable.
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