Should I sell my house and reinvest in fixed saving account

karate1959

Bit of a dilemma can someone help

We rent our house about £3000 a month before tax ect. Tennant moving out this month.
I am 66 and wife 58, we use income to support my private and state pension and my wife and I are both retired. My wife pays all tax on self-assessment basis. Roughly profit of £32k per year after tax and costs.
Is it time to consider selling and reinvesting the proceeds of approx £950k into a multiple fixed saving accounts, no risk. therefore my wife would pay tax on interest, as I already pay 40% on pensions.
House will need some £50k upgrade over the next few years to update, house is only 15 years old.
Appreciate that house will increase in value each year.
bit of a crossroads, would really appreciate your comment please.

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penners324

Why not invest it in S&S ISAs and grneral investment accounts? Far better return.

Looks like a sensible thing to sell to freeze up cash fr retirement .

Albermarle

Apart from the actual finance side, running a rental can be a lot of hassle and your next tenants might not be great.
However you obviously have some experience, but maybe now you are getting older, it is time to sit back and relax a bit more.
From a finance point of view, cash savings are paying 4 to 4.5% , but creeping down. As a guess longer term maybe be more like 3%? You can both put £20K pa into a cash ISA which will cut down the amount of tax on interest, but there will still be some with such a large amount. You could also both put £50K into Premium Bonds which are tax free.
As you hopefully have many years left, investing some of it would make sense, as in the long term you should get a better return.

Keep_pedalling

Personally I would sell and start enjoying life a bit more with the proceeds. Yes I know you are likely to have a CGT liability, but you must be deep into IHT territory and it is going to very difficult to mitigate that liability if the bulk of your assets are tied up in bricks and mortar. 

poseidon1

karate1959 said:

Bit of a dilemma can someone help

We rent our house about £3000 a month before tax ect. Tennant moving out this month.
I am 66 and wife 58, we use income to support my private and state pension and my wife and I are both retired. My wife pays all tax on self-assessment basis. Roughly profit of £32k per year after tax and costs.
Is it time to consider selling and reinvesting the proceeds of approx £950k into a multiple fixed saving accounts, no risk. therefore my wife would pay tax on interest, as I already pay 40% on pensions.
House will need some £50k upgrade over the next few years to update, house is only 15 years old.
Appreciate that house will increase in value each year.
bit of a crossroads, would really appreciate your comment please.

.
 

Not enough infor supplied. How much has the house appreciated during ownership period and how much CGT would be due on a potential £950k current sale price? Is there a mortgage outstanding that further reduces proceeds ( although taxable profit suggests not).

With interest rates  in decline, you could be looking at a current income yield of just over 4% on whatever the sale proceeds would be, but this is likely to decline in years to come.

That said your current gross yield on the property is around 3.7% (before costs), so depending on the extent of  your likely net proceeds on a future sale, you could get close to your net rental income from passive saving accounts.

Certainly, the environment for small landlords has become increasingly hostile, so not withstanding potential future loss of capital growth  on the property, selling up would certainly make your life easier.

Also as intimated by Keep_pedalling if you are well into IHT territory and this is of concern to you, much easier to implement IHT avoidance strategies with liquid capital compared to illiquid property.

karate1959

Hi, thank you so for your help. The £950k is the amount remaining after CGT deductions. ie bought for a £580k market value over 15 years is £1.1m. Therefore would be the capital amount we would invest.
No mortgage outstanding. I understand the IHT implications hopefully a worry for a later thought process.

SiliconChip

penners324 said:

Why not invest it in S&S ISAs and grneral investment accounts? Far better return.

Looks like a sensible thing to sell to freeze up cash fr retirement .

It'll take almost 25 years at £20K per year each to invest £950K in ISAs, but I'd agree that it's a good thing to do with the first £20K and each year after that. And it probably does make sense to put a large chunk of the rest into shares rather than cash savings.

Keep_pedalling

karate1959 said:

Hi, thank you so for your help. The £950k is the amount remaining after CGT deductions. ie bought for a £580k market value over 15 years is £1.1m. Therefore would be the capital amount we would invest.
No mortgage outstanding. I understand the IHT implications hopefully a worry for a later thought process.

At you ages you should not be putting it very much longer, you will be in your mid 70s buy the time any gifting dropped out of your estate if you started today.

Yorkie1

Just to clarify - you refer to "my house"? I assume that you own a house that you live in, and the thread refers to a separate property which you also own but rent out, and are considering selling?

If you only own one property, i.e. the rented out property, it would make sense to consider buying a property of your own to live in rather than rent as tenants as at present.