Advice needed regrading death of a landlady and tax

maddie24

Am at a bit of a loss and could do with some advice (please no flames)

My mum was diagonised with terminal cancer 18 months ago and went downhill very quickly. While undergoing chemotherapy, her and my 10 year old sister moved into my house and because her condition got worse, neither of them moved back. As mum did not have an income due to the cancer and she had bills and a large mortgage (£150k) she rented her house out. Rent is £1000 and mortgage is approx. £700 a month.

She passed away last week and I am now trying to sort probate out. I have today discovered that it appears that she had not declared that she was renting the house out. I have no idea why she did not declare it- she probably wasn't well enough at the time to think it through properly. Does anyone know what the penalty will be or even what to do next?

This is all new to me, I am 24 and become a guardian to my sister and money is already tight. The probate is needed in order for the life insurance to pay for the mortgage.

Thanks in advance.

DGJsaver

I cant help but i wanted post to say sympathies and some helpfull bod will be on soon as to give you good advice

Dan

clutton_2

i am so sorry for your loss at such a tender age. Are you the executor of her Will ? If you are not, then talk to the Executor and do this together - its a grim task on your own.

i would suggest phoning the Inland Revenue first of all, and explaining what happened - they are there to help folks thru difficult times like these.

Probate is a list of your mums assets, and another list of her debts. She MAY be due to pay some tax on the rental, but, she may not. Collect together all the expenses she paid on the rented house - (she can offset these against the rental income to reduce her profit and therefore reduce her tax)

did she use a letting agent - their fees are claimable?
She can claim her mortgage interest (not the capital repayment element)
She can claim the cost of a CORGI landlords gas safety certificate
She can claim the repairs she may have done
She can claim if she bought furniture for it

etc etc

Unless it is a simple straightforward Will, i suggest you find someone to help you thru all this - maybe an older Aunt or Uncle who understands finance ? Its a hard enough time for you without struggling with probate on your own.

best wishes

maddie24

Thank you both for your quick replies and sympathies.

Clutton- The mortgage was interest only so I assume that the entire mortgage can be claimed back? I just rang the Inland Revenue and you're right they were helpful. The roof was fixed in the last 6 months for £2000 and including the interest only mortgage, the lady I spoke to seemed to suggest that there is no tax to pay. I will however write a letter to my local tax office to cover myself just incase.

clutton_2

excellent - wait a bit before writing to IR - there will be a lot of paperwork to go thru, and you are best to tell them everything you find in one letter - you may find payments on mums bank statements that you might be able to claim for -

did she visit the property - you can claim mileage for her (or train fares) if she did (as long as she did not have a letting agent - you cannot claim both)

Yes you can claim all the intereset only mortgage interest

you can claim the house insurance for the rental house

you can claim your mums administration costs - phone calls, postage, that sort of thing.

have you worked out how much rent she got yet ?

you may need to find receipts for some of the expenses - if the roof was repaired (rather than replaced) then you will be able to claim that in this tax claim, but, if it was fully replaced it becomes a "Capital" expense and is only claimable when you sell the property.

You may also need advice re Capital Gains tax - should you decide to sell mums house if you dont live in it. The rules are changing in April.

best wishes

jess1974

Maddie i just wanted to send you my sympathies, i lost my mum to cancer too, i think you are wonderful to become your sisters guardian, i wish you both a brighter future...