Can I Buy a House for My Child

Yes, you can buy a house for your child in the UK, and many parents choose to do so as a way of helping them onto the property ladder. With rising house prices and stricter mortgage criteria, parental support is increasingly common. Whether you plan to buy the house outright, contribute towards a deposit or buy jointly, there are several legal, financial and tax considerations to understand before proceeding.

Choosing the right method depends on your financial position, your child’s age and income, and your long-term intentions for the property.

Buying the Property in Your Name

If you wish to purchase the home outright in your own name and allow your child to live there, you can do so as a second home or investment property. You will be the legal owner, responsible for the mortgage if applicable, and liable for any maintenance or insurance.

However, buying a second home usually means you must pay the additional three percent stamp duty surcharge, even if your child is the one living in the property. This type of purchase can also have capital gains tax implications if the house increases in value and is sold in future.

Buying the Property in Your Child’s Name

You may prefer to buy the home in your child’s name, either by gifting the full amount or by providing a deposit so they can apply for a mortgage. Gifting money requires careful planning, particularly if the amount is large, as it could affect inheritance tax if you die within seven years of making the gift.

Lenders usually require proof that the money is a gift and not a loan. They may also ask you to sign a declaration confirming that you do not expect repayment and that you will have no ownership rights over the property.

Buying a Property Jointly

Another option is to buy the home jointly with your child. This can be done as joint tenants or tenants in common, depending on how you want to split ownership. Joint mortgages are available that take both incomes into account, which can help your child qualify for a higher loan amount.

However, joint ownership comes with legal and financial responsibilities for both parties. If one person cannot keep up with repayments, the other becomes liable. It is advisable to draw up a declaration of trust or co-ownership agreement to clarify who owns what and what happens if one party wants to sell.

Using a Trust or Limited Company

Some parents choose to purchase a house for their child through a trust or limited company. This can help with long-term tax planning, protect the asset and potentially reduce liability for future care costs or inheritance tax. However, these structures can be complex and should only be set up with advice from a solicitor or tax adviser.

Buying through a company may also mean higher mortgage rates, additional stamp duty and stricter lending criteria.

Tax and Legal Considerations

Buying a house for your child can have various tax consequences. You may face higher stamp duty rates on second homes, and if the property is sold later, capital gains tax could apply. If you gift the house or contribute a large sum, inheritance tax rules may come into play depending on the timing of your death.

It is also important to consider legal ownership. If your child marries or enters into a relationship, the property could become a joint asset. Protecting your child’s interest with a declaration of trust or by placing the property in their sole name may offer added security.

Conclusion

You can buy a house for your child in several ways, each with its own benefits and complications. Whether you buy it in your own name, gift funds, buy jointly or explore more complex ownership structures, it is essential to consider tax, legal and financial implications. Always seek advice from a solicitor or financial planner to ensure the arrangement meets your goals and protects your investment, while giving your child a secure start on the property ladder.