Q My mother recently died, leaving my sister and me 50% shares in the former family home. The house is currently privately let and we each get 50% of the rent each month. My sister and I get on well. I am recently retired and have paid off my shared-ownership mortgage, and if the family house were sold, half the profit would raise enough capital for my husband and me to staircase to 100% and own our own flat outright but that would not leave much of a nest egg. What’s the best thing to do?
A I’m assuming that staircasing to 100% would mean an end to paying rent on the share of your flat that you and your husband don’t currently own. If that’s correct and if what you pay out in rent is more than the rent you receive (after taking income tax into account), selling your mother’s house would seem to be a reasonable option. It would certainly reduce your monthly outgoings, which may be an attractive proposition on a reduced post-retirement income.
But if the rent you pay out is less than the after-tax rental income you get, the answer is less clearcut. A lot depends on whether you and your sister are happy to continue to be landlords long term and also whether you are both happy to meet the costs of keeping the property up to scratch.
If you’re not convinced that this is what you want long term, you need to talk it over with your sister and perhaps suggest that you sell up when the current tenants decide to leave. It may also be worth mentioning that when you do sell, you may have to pay capital gains tax (CGT) if your share of any increase in the value of the property from the date you inherited it comes to more than the CGT allowance of £6,000 (in the 2023-24 tax year). In the previous tax year the CGT allowance was £12,300, and it is due to go down to £3,000 a year from the 2024-25 tax year.