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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15976
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My 85 year old mother has two properties, one her main home

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My 85 year old mother has two properties, one her main home and the other a home she rents out to earn an income. She is considering selling one of the properties to help pay for nursing care as she is now dependent on. If she sells the rental home, she stands to realise a substantial capital gain. If she sells her main home, there will be no capital gains tax (?) but what would the inheritance tax position be upon her death? If her total estate including the rental property is less than the tax free limit, will she be subject to inheritance tax? Which property should she sell to minimise her tax liabilities, to have the monies available for care, assuming her estate upon her death, will be less than the tax free limit?
Can you tell me whether your mother is a widow please.
Customer: replied 2 years ago.

Yes, she is a widow


Leave this with me while I draft my answer.
Customer: replied 2 years ago.

Okay. I'll await your answer

Hi again.

If your mother sells her main home, assuming it has been her main residence since she bought it, any gain will be exempt from CGT. For IHT purposes, her estate will only be comprised of assets she held at the time of her death and the value of any gifts she makes in the seven years before her death. Such assets may include cash from the sale of her main home if it has not all been paid out in care home fees by the time she passes away.

As the disposal of the second property will give rise to a CGT liability assuming it has never been your mother's main home, then from a tax point of view, it would make sense to take advantage of the exempt status of a gain from the disposal of the main home rather than selling the let property which is producing income.

Take a look here for information on the transfer of an unused nil-rate IHT band.

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

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