Most parents who want to help their children to buy a home are unaware of how much they can claim off the tax bill, says Myra Butterworth in The Daily Telegraph.
One of the most useful reliefs is Principal Private Residence Relief, which is available if you live in a property, even if you let part of it out.
Say you lend your daughter £20,000 as a deposit and then guarantee a £180,000 mortgage for her to buy a four-bedroom house in her name, which she shares with three friends. The house is later sold for a profit of £80,000, but since your daughter made use of one bedroom and four communal rooms, five eighths or £50,000 of that gain is exempt from tax.
Your daughter should also be able to claim Lodger Relief for one of the rooms, meaning that an additional eighth is exempt. That leaves £20,000 potentially exposed, but since this is well below the £40,000 Letting Relief available, no capital gains tax should result.
If you’re worried about your child running off with the proceeds, you can buy the property in a trust and, providing the terms allow your child to live in it as their principal private residence, they should still benefit from the tax relief.