Rent income on deceased mothers property

mikerj

My wife is renting out her deceased mother’s house with the rental income going to the local council to reduce large outstanding care home fees. I am the executor and am not sure who should declare the income, my wife via self assessment or the late mother’s estate. Any help would be greatly appreciated.

RAS

In whose name is the property currently registered?

mikerj

It is registered with the mother.

Flugelhorn

mikerj said:

It is registered with the mother.

then it is income to the estate

mikerj

Even though my wife is the landlord?

RAS

Yes. HMRC allocate tax liability based on ownership. So you need to do a tax return for the estate of mum. And make sure you make the appropriate deductions for repairs, insurance, inspections, certificates etc.

poseidon1

Also bear in mind that this action in handling the outstanding estate debt in this way , means the administration of the estate remains ongoing year after year until presumably either the debt is satisfied, or property sold to pay off the outstanding balance.

 Hopefully you are both prepared for the ongoing obligation to submit annual estate tax returns going forward. Bear in mind unadministered estates do not enjoy a personal tax free income allowance.

RAS

And if there is any increase in the property value between MIL's death and disposal, either to your wife or by sale, there could be a CGT liability as well.

Flugelhorn

mikerj said:

Even though my wife is the landlord?

the estate is the owner. any reason why you can't just sell the property now?

poseidon1

Flugelhorn said:

mikerj said:

Even though my wife is the landlord?

the estate is the owner. any reason why you can't just sell the property now?

I can fully understand the desire to hang onto the inherited property especially if they own their own.

 Buying a second property for investment purpose attracts 2nd property penal stamp duty as well as normal stamp duty depending on purchase price. This means the purchase starts off life at a book loss equal to stamp duty ( and other associated purchase costs). 

The inherited property gives them a nice clean start ( subject to servicing the estate debt) with better opportunity to actually make a capital gain in future on its eventual disposal ( if that is their intent).  

Keep_pedalling

If she is renting it out long term and she is the beneficiary you transfer it to her name. Depending on her tax status that will lead to less tax being paid If her other income is below her personal allowance.