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  • Tax

    What to do with the family home

    With the prospect of retirement looming on the horizon my husband and I are considering moving to a cheaper area of the country where house prices are half what they are where we currently live.

    We have paid off the mortgage on our family home and it has gone up in value since we bought it 25 years ago. We have two options; to sell the family home buy a new one for less and invest the difference to supplement our pensions, or to rent out the family home. My instinct is to do the latter as it would keep the house in the family for our children to inherit, but I'm unclear on the implications for inheritance tax and capital gains tax. We can't be alone in this dilemma and I'd be interested to gather some collective wisdom.

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    It depends on the value of your house. For upto 650 K as a married couple you dont need to worry about the inheritance tax.

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    Thanks Shassan. Does that still apply if we have moved out and are renting it out?  Won't the tax exemption be transferred to the new cheaper property?

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    Yes, I believe it's the primary permanent residence that get the tax exemption. Check with tax specialist.

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    the residence nil rate band is in addition to the 650k mentioned above and it does allow for downsizing but I believe you have to sell the other property

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Alison,

    Sell the family home, take the money, invest it or spend it and enjoy it.

    Your children will still inherit the money, as long as you haven't spent it, and the likelihood is they will not want to live in the family home themselves, so will only sell it when the time comes.

    If you let it, how would you feel if your tenant did not look after the "family home" or worse trashed it?

    If you are not currently LL, starting in your autumn years is not ideal, being a LL is not just sitting back and letting the money roll in.

    Fred.

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