Help me with capital gains tax query please

mrs_tooti-frooti

Hi,

I am completely lost so any advice is welcome

We bought the house that my in-laws lived in so that they could live there without worrying about the mortgage. They both passed away 5 years ago.

We have now got round to sorting it out - we would prefer to sell it but don't know anything about the taxes that we will be liable for.

I wondered if it would be better to rent out than sell but I've never done that before either so don't know where to start!!!

00ec25

do you own your own house and that of your in laws in your own name only or jointly with your partner?
I assume you do not and have never lived in your in laws house yourself as your main home , ie you have lived in your own home continuously ("principal private residence" or PPR) whilst you owned the second property

Capital gains tax
when you sell the in laws house you will be liable for capital gains tax since that is not your PPR. You will pay 18% on the difference between the price you paid for it and the price you sell it for. You can reduce this "gain" by your annual CGT allowance (for either you and/or your partner depending on who owns the property) as well as some allowable costs

renting
read the direct gov website for guidance and the sticky at the top of the forum and about the last 200 messages on this forum for an idea of what is involved in being a LL. Rent is subject to income tax and HMRC will require you to do an annual self assessment tax return

http://www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/index.htm

financially consider this:
if you sell the house you have a lump sum you can put in a savings account or invest on the stock market etc - this is "clean" money you can use when you want.

if you rent out then you have a lump sum tied up in a property which is not easy to get at quickly and which is producing a rental yield (ie rental income divided by value of house as a %).
If this yield is below 6% forget it, sell up,
if between 6% -10% then renting may be financially viable but being a LL is not a free ride and you will have to work at it, how much stress do you want for a few % above a savings account rate.
If >10% you are doing stunningly well and should rent

mrs_tooti-frooti

Thanks for your reply - some good advice there. I wll check out the directgov site.

Thank you.