Implications of keeping inherited property and buying a home to live in

pjs493

user1977 said:

pjs493 said:

user1977 said:

You're potentially liable for CGT on the flat already (starting with the inheritance value) as it isn't your own residence, so that's going to be the same whether or not you buy an additional property. Stamp duty on your purchase would be at the additional rate because you already own a residential property. Plus obviously you have equity tied up in the flat and all the hassle and risks of being a landlord (though hopefully a net income and eventually some sort of capital gain). But you might be better with your money invested somewhere else.

Because of my husband’s job meaning that we couldn’t live in the house (due to the exigencies of military service) it was considered our primary residence. So I don’t think I’d be liable for any just because I don’t currently live in it. 

Is capital gains due on an inheritance between spouses?

I think you're right about the CGT relief for that reason, but have you checked when that ends (if it hasn't already)?

As I said, CGT is calculated with the start value being whatever you used for probate. The capital tax on the inheritance itself is Inheritance Tax, and that's nil on any estate passing between spouses.

I'll have to explore the implications of CGT for those widowed by someone dying in military service. Potentially the rule applies at the point that I have to move out of the housing we were provided with my husband's job (surviving spouses are given two years grace before needing to move on or face market rate rent from the MOD).

According to Zoopla (which I know is the equivalent of doing some fag packet maths), the property is actually worth a few thousand pounds less than the valuation at the time I applied for Probate. Over the last 15 years the property has basically floated around the price my late husband paid for it. Some months its worth a few grand more, other months a few grand less. It often seems to depend on the time of year, COVID obviously took it's toll too. Comparatively, my sister bought a house around the same time my husband bought his flat and within 5 years it had gained £20k in value when she sold it and bought another.

The flat was bought as a new build apartment in what was supposed to be an up and coming area with the sales team talking about how there would be new transport links, shops, restaurants, and wine bars on the ground floor, etc that would add value to the property. None of it came to fruition and except for a coffee shop and a restaurant, the retail units are empty. Service charges went from a few hundred pounds a year to a few thousand which I think is the cause of the flat not really gaining in value.

The rental income on the other hand has increased over the years which is one reason why I'm considering keeping it as a rental property. But I'm wondering if it would be easiest just to sell and buy a bigger house with or without a mortgage that could potentially be close to forever home territory. Whereas if I keep the flat I'd be buying a more modest house with or without a mortgage and would have to sell both properties in the future to buy a forever home.

Lots to think about which is why I thought it might be useful to post on here and get some thoughts bouncing around.

thegreenone

Would the tenants consider buying the property?

pjs493

thegreenone said:

Would the tenants consider buying the property?

They are saving to buy a house so that they can grow their family. The guy initially rented it as a single man and then his wife moved in when they got married. Their plan is to save to buy their own place so that they can have the space to have children. I think they'd prefer to be in something bigger now, but are staying in the flat so that they can spend less on rent and put more away into savings. 

At least that is what they told us they last time they renewed their tenancy agreement. I could always ask the question, but in the area where the (two bed) flat is, it is possible to buy a (three bed) house for a similar amount of money, so I don't think buying it would be beneficial for them.