students, thus providing an income against which the costs can be set for tax purposes, bearing in mind that a child has the income tax personal allowance, so income tax should not be payable.

If the child's income exceeds the income tax personal allowance, the 'rent a room' tax relief will also apply whereby if a room is let for less then ?4,250 a year, the income is tax free.

At the end of the course, the property can be sold, the mortgage and your loan repaid and hopefully a capital gain made, which your child can save or use as a deposit on a further home. It would be subject to capital gains tax, but this would be reduced or eliminated by taper relief and the arinnual exempt amount.

Investing in ground rents

Ground rents are paid by leasehol

Property tends to grow in value like equities and so is a good long term investment.

The biggest investment you can make in property is owning your own house. Some experts say this is enough exposure to the property sector.

Indirect investment in property can be achieved through companies whose business is investing in property, usually commercial property, or via pooled investments in property such as unit trusts and investment trusts.

Buy to let

Further direct investment in property buying to let for example is a specialised area of investment which can be yield both income and capital gain.

It has become increasingly popular in recent years as the demand for rented property has increased (and may continue to increase with people living longer and the trend towards more single parent families) and it can be a way of using the lump sum from your pension scheme on retirement to provide additional income and something to keep you busy!

Most buyers to let take out a mortgage and there special njortgages available, based on the rent you can charge rather than your income, so that only part of the cost needs to be put up (perhaps no more than 20%).

Mortgage interest and other expenses can be set against income for income tax purposes. For a higher cost, a manager can be appointed to take away some of the work and worry.

There are risks in direct ownership, such as not being able to find a tenant, rent not being paid and damage to the property. Provision for these events and for the cost of repairs should be made when calculating the viability of the investment.

There are legal expenses, too.

You need to take care in choosing a suitable area and size of property (number of bedrooms). Do not fall into the trap of choosing a place merely because you like it.

Using an unapproved pension scheme

A more sophisticated version of buy to let, suitable for higher rate taxpayers, is to finance the purchase through a funded unapproved pension scheme (FURBS) in a company which you set up for the purpose.

The pension scheme buys the property and your pension contributions finance the mortgage repayments.

There are significant tax advantages:

• profits are taxed at the favourable small company rate of 22%;
• the company pays a lower rate of caffital gains tax (34 %);
• inheritance tax is avoided as the property passes to your heirs from the company and so stays out of your estate.

There are substantial costs involved in setting up the arrangements, so this method is only suitable for people who can finance a large property portfolio.

University accommodation

A particular area of buying to let arises if you have a child going to university. It may well be worth finding a property near the university and arranging for your child to buy it, by loaning the deposit and if necessary acting as guarantor for the mortgage.

The primary 'income' is the saving through not paying rent but the property needs to be large enough to let out rooms to other students, thus providing an income against which the costs can be set for tax purposes, bearing in mind that a child has the income tax personal allowance, so income tax should not be payable.

If the child's income exceeds the income tax personal allowance, the 'rent a room' tax relief will also apply whereby if a room is let for less then ?4,250 a year, the income is tax free.

At the end of the course, the property can be sold, the mortgage and your loan repaid and hopefully a capital gain made, which your child can save or use as a deposit on a further home. It would be subject to capital gains tax, but this would be reduced or eliminated by taper relief and the arinnual exempt amount.

Investing in ground rents

Ground rents are paid by leasehold

ng longer and the trend towards more single parent families) and it can be a way of using the lump sum from your pension scheme on retirement to provide additional income and something to keep you busy!

Most buyers to let take out a mortgage and there special njortgages available, based on the rent you can charge rather than your income, so that only part of the cost needs to be put up (perhaps no more than 20%).

Mortgage interest and other expenses can be set against income for income tax purposes. For a higher cost, a manager can be appointed to take away some of the work and worry.

There are risks in direct ownership, such as not being able to find a tenant, rent not being paid and damage to the property. Provision for these events and for the cost of repairs should be made when calculating the viability of the investment.

There are legal expenses, too.

You need to take care in choosing a suitable area and size of property (number of bedrooms). Do not fall into the trap of choosing a place merely because you like it.

Using an unapproved pension scheme

A more sophisticated version of buy to let, suitable for higher rate taxpayers, is to finance the purchase through a funded unapproved pension scheme (FURBS) in a company which you set up for the purpose.

The pension scheme buys the property and your pension contributions finance the mortgage repayments.

There are significant tax advantages:

• profits are taxed at the favourable small company rate of 22%;
• the company pays a lower rate of caffital gains tax (34 %);
• inheritance tax is avoided as the property passes to your heirs from the company and so stays out of your estate.

There are substantial costs involved in setting up the arrangements, so this method is only suitable for people who can finance a large property portfolio.

University accommodation

A particular area of buying to let arises if you have a child going to university. It may well be worth finding a property near the university and arranging for your child to buy it, by loaning the deposit and if necessary acting as guarantor for the mortgage.

The primary 'income' is the saving through not paying rent but the property needs to be large enough to let out rooms to other students, thus providing an income against which the costs can be set for tax purposes, bearing in mind that a child has the income tax personal allowance, so income tax should not be payable.

If the child's income exceeds the income tax personal allowance, the 'rent a room' tax relief will also apply whereby if a room is let for less then ?4,250 a year, the income is tax free.

At the end of the course, the property can be sold, the mortgage and your loan repaid and hopefully a capital gain made, which your child can save or use as a deposit on a further home. It would be subject to capital gains tax, but this would be reduced or eliminated by taper relief and the arinnual exempt amount.

Investing in ground rents

Ground rents are paid by leasehol

airs should be made when calculating the viability of the investment.

There are legal expenses, too.

You need to take care in choosing a suitable area and size of property (number of bedrooms). Do not fall into the trap of choosing a place merely because you like it.

Using an unapproved pension scheme

A more sophisticated version of buy to let, suitable for higher rate taxpayers, is to finance the purchase through a funded unapproved pension scheme (FURBS) in a company which you set up for the purpose.

The pension scheme buys the property and your pension contributions finance the mortgage repayments.

There are significant tax advantages:

• profits are taxed at the favourable small company rate of 22%;
• the company pays a lower rate of caffital gains tax (34 %);
• inheritance tax is avoided as the property passes to your heirs from the company and so stays out of your estate.

There are substantial costs involved in setting up the arrangements, so this method is only suitable for people who can finance a large property portfolio.

University accommodation

A particular area of buying to let arises if you have a child going to university. It may well be worth finding a property near the university and arranging for your child to buy it, by loaning the deposit and if necessary acting as guarantor for the mortgage.

The primary 'income' is the saving through not paying rent but the property needs to be large enough to let out rooms to other students, thus providing an income against which the costs can be set for tax purposes, bearing in mind that a child has the income tax personal allowance, so income tax should not be payable.

If the child's income exceeds the income tax personal allowance, the 'rent a room' tax relief will also apply whereby if a room is let for less then ?4,250 a year, the income is tax free.

At the end of the course, the property can be sold, the mortgage and your loan repaid and hopefully a capital gain made, which your child can save or use as a deposit on a further home. It would be subject to capital gains tax, but this would be reduced or eliminated by taper relief and the arinnual exempt amount.

Investing in ground rents

Ground rents are paid by leasehol

any pays a lower rate of caffital gains tax (34 %);

inheritance tax is avoided as the property passes to your heirs from the company and so stays out of your estate.

There are substantial costs involved in setting up the arrangements, so this method is only suitable for people who can finance a large property portfolio.

University accommodation

A particular area of buying to let arises if you have a child going to university. It may well be worth finding a property near the university and arranging for your child to buy it, by loaning the deposit and if necessary acting as guarantor for the mortgage.

The primary 'income' is the saving through not paying rent but the property needs to be large enough to let out rooms to other students, thus providing an income against which the costs can be set for tax purposes, bearing in mind that a child has the income tax personal allowance, so income tax should not be payable.

If the child's income exceeds the income tax personal allowance, the 'rent a room' tax relief will also apply whereby if a room is let for less then ?4,250 a year, the income is tax free.

At the end of the course, the property can be sold, the mortgage and your loan repaid and hopefully a capital gain made, which your child can save or use as a deposit on a further home. It would be subject to capital gains tax, but this would be reduced or eliminated by taper relief and the arinnual exempt amount.

Investing in ground rents

Ground rents are paid by leasehol

students, thus providing an income against which the costs can be set for tax purposes, bearing in mind that a child has the income tax personal allowance, so income tax should not be payable.

If the child's income exceeds the income tax personal allowance, the 'rent a room' tax relief will also apply whereby if a room is let for less then ?4,250 a year, the income is tax free.

At the end of the course, the property can be sold, the mortgage and your loan repaid and hopefully a capital gain made, which your child can save or use as a deposit on a further home. It would be subject to capital gains tax, but this would be reduced or eliminated by taper relief and the arinnual exempt amount.

Investing in ground rents

Ground rents are paid by leaseholders to the owner of the freehold of a property. So investing in ground rents means buying the freehold of such properties.

There are two types:

• those which pay a reasonable income; and
• those which have a very low income but are expected to show capital growth.

Freeholds are available for houses and flats and for commercial premises such as shops and there is a wide variety of prices. Those where the leaseholders are responsible for maintenance and insurance (usually commercial premises) are less troublesome.

Leaseholders rarely fail to pay ground rent because the consequences for them might be drastic the freeholder can sue for repossession. Therefore the income should be steady and around 10% before tax is achievable.

Capital growth freeholds usually have a relatively short period to run before the lease expires and the freeholder is hoping that the leaseholder will then wish to buy the freehold at what is called the marriage value.

Freeholds are usually sold at auctions and the income is set, so the return is easily calculable. There may be rent reviews at intervals in the remaining life of the lease.

It is possible to get a mortgage for buying a freehold, but it needs to be of the incometype so that money is forthcoming to pay the interest on the loan. Borrowing to invest for growth is more risky.