Tax implications

mrsspurs30

My husbands father passed away in April and we have been trying to sell his property since then. due to the current market, we have only had 2 viewings and no sale, as a result the house has dropped in value by about £30,000 so we have decided to take it off the market and rent it out. My question is are there tax implications. It has no mortgage and would have been below the inheritance tax threshold had we been able to sell it.

Merlin_Accounts

Hi

A couple of things to think about/be aware of.

The house should have been valued at the time of death and formed part of the total estate. This value becomes the purchase cost of the property in your hands, whilst the date of death is in effect your purchase date. Any future sale will create a capital gains tax liability, but only if you sell at a profit (ie you sell for more than the "cost"). Even then there are reliefs that may be available (based on current legislation) that could help reduce or even cancel out any liability. If you have any capital gains elsewhere you could even look at crystalising your loss to set against those gains (dont do this without advice though!).

So far as letting is concerned, you will be liable to tax on the rental income (net of expenses). It is up to you to make sure you notify the tax man of your new income source - unfortunately this will bring you into the self assessment tax regime. Assuming the rental has only just started you will need to do a tax return next year (after 5 April 2009).

I'm not by any means an expert on the rules for letting but I think you may need to check out whether you are complying with all the current regulations covering landlords and private lettings - pretty certain there are members of these forums who can guide you on this (things to be aware of, for example, is the landlord deposit scheme, etc..)