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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My mother is 94 & has lived in her house since she purchased

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My mother is 94 & has lived in her house since she purchased it new in 1970. She has suffered a stroke and as a result will live with my sister, a qualified nurse. It is possible she will have to go into residential care if my sister cannot cope. We are considering letting out her house in order to pay for her care, but in doing so would she be liable for capital gains tax if she has to sell? If she dies whilst the property is let will she be liable for CGT?As the house was so cheap when she bought it and is now worth £280K CGT would be considerable?
Submitted: 4 months ago.
Category: Tax
Expert:  TonyTax replied 4 months ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 4 months ago.

For an individual who is moving from one home which has been their main home to another, if they move before they sell the first property they will be given the last 18 months of ownership as a tax free period. See HS283 here.

For an individual moving into a care home, the period of grace after moving out is 36 months. See here for confirmation. I'm not sure the 36 months will apply to an individual moving in with a relative as opposed to a care home but certainly the last 18 months of ownership will be tax free as well as the period your mother lived in the house. If the property is let, then letting relief will apply to any gain not covered by the last 36 months of ownership and that can reduce a gain by up to £40,000. See example 9 in HS283 to see how main residence relief and letting work together. The March 1982 value of the property should be used as the cost of the property for CGT purposes unless the actual 1970 purchase price is higher which I doubt.

I hope this helps but let me know if you have any further questions.

Expert:  TonyTax replied 4 months ago.

I have to go out for but will be back in about 25 minutes.

Customer: replied 4 months ago.
I don't understand the Match 1982 value bit - please explain
Customer: replied 4 months ago.
Do all these rules apply even though my mother won't own another house but will be cared for by a relative at theirs?
Expert:  TonyTax replied 4 months ago.

Capital Gains Tax was introduced in 1965. It's start point was moved to 1 April 1982 in the 1980s. Any gains accrued up to and including 31 March 1982 are exempt from CGT. So, where an asset was bought before 1 April 1982, the 31 March 1982 value of that asset can be used as its "cost" for CGT purposes.

The rules as I've described them do apply to your mother.

Customer: replied 4 months ago.
Thanks for your replies ,- do I presume correctly that if my mother keeps the house and then lets it out until she dies it would then only be liable for any inheritance tax due as part of her estate?
Expert:  TonyTax replied 4 months ago.

That's correct. There can only be CGT if she sells it or gives it away before she dies.

When your mother dies, the house will be part of her estate at its then market value for IHT purposes so that only any increase in value from that point would be taxable as a capital gain if it were sold by the estate or passed to the beneficiaries of the estate.

Customer: replied 4 months ago.
Thanks very much for your help
Expert:  TonyTax replied 4 months ago.

Thanks.

Would you mind rating my answer before you leave the site please.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15753
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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