Renting Property to pay for care fees

seashell63

Hullo,
I am new to the forums !! I have p.o.a for my Father's financial affairs.
He and Mum bought their house in 2003 and the property is mortgage free. Mum died in 2008 and in 2010 Dad was placed into a care home following a stroke, as a ' self funder' and I rented out his property to pay towards his care fees. ( The property has been rented out for around three and a half years ). I m now considering selling the property and buying smaller buy to let properties to release some funds and I hope would be easier to manage .

I am not sure how to calculate Capital gains tax, on Dads house which was his only residence and was subsequentally rented out, and also not sure how it works out for buy to let property ( I would not be looking to have a mortgage on this ).

Forgive me for asking such a basic question- the tenants leave in August so I will need to make a decision on the best course of action soon,

Thankyou in advance.

Savvy_Sue

For Dad's house, we'd need

1. a starting point for the value of Dad's house - I think this is when it was first bought

2. the value of the house at the point of sale (which obviously you'll have to guesstimate)

3. the month and year when any of these events happened.

I'm not sure if Mum's death comes into it, presumably at that point Dad gained the value of half a house, but wasn't liable to pay CGT.

You can put some of the expenses of selling the house against the CGT bill.

The years when it was Dad's primary residence don't count, and some of the time it's let out don't count.

With BTL, you obviously won't get any allowance for it being Dad's primary residence, ever, and the CGT will only be due when the properties are sold. There could be an IHT liability on death, depending on the size of Dad's estate.

This is an area where the sums might make it well worth while getting 'proper' financial advice once you've got your head round the basics.

Your_Hero

CGT is the difference between the purchase price and the eventual sale price. He has a CGT allowance of £11,000 this tax year that would offset some of the gain. You can also deduct costs from the sale.

This final gain is then added to his income for the year and if he is still a basic rate tax payer then it's 18% CGT. Anything that pushes over to HRT is taxed at 28%.

Question: I understand you have LPoA, but why are you releasing funds? Take care that you are not releasing funds for your benefit, because it's not your money and it could be seen as abusing your powers, and probably depriving assets against the estate.