Selling Mother-in-Law's house after renting it - tax implications?

Hungerdunger

My Mother-in-Law moved into Residential Care earlier this year on a permanent basis having owned and lived in her current house for around ten years.


We are thinking of renting out the house to provide funding for her care, and depending on the rent we negotiate and a couple of other variables, we think my MiL could manage to fund her Residential Care for around 6 to 7 years, at which point we would need to sell the house to free up further funds.


Obviously it's still a long way in the future, but we'd be interested to know whether the fact that the house has been rented out in the meantime will have any tax implications (CGT or otherwise) when it is sold.

G_M

Yes. If sold now there would be no CGT as it's her main residence.
If sold following lettting it, CGT would be payable, though there are rules that take account of the years it was her main residence and years it was not.


The rent received would of course be taxable income.


More here:


** Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

Topics covered:

* Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new tenant protection (2015)

* Deposits: payment, protection and return

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

* Rent increases: when & how can rent be increased?

* Repossession: what if a LL's mortgage lender repossesses the property?

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?

Keep_pedalling

There would also be no CGT to pay if sold after her death.

Do you currently have POA to act for her.

00ec25

CGT
she is given 100% tax relief for the entire time she occupied the property as her main home. That is called Private Residence Relief (PRR)

from the date she moved out, and crucially because she is moving into a care home, she is also given a further 3 years (not 18 months in case anyone is confused!) extension to her PRR period.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64986

after that extension has ended she would then be liable for CGT. HOWEVER, you state that by then it will have been let out, so she can then claim letting relief on top of her PRR on the basis it was once her main home subject to PRR. Letting relief gives her up to £40,000 of exempt gain

see here for an example calculation:
https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2