Selling former family home, now live in deceased partner's house

[apc]

My Mum currently rents out our former family home, having moved in with her partner who has now died. She inherited a lifetime right to live in the latter property but this will revert to her partner's family on her death. Can anyone give me some guidance on CGT implications if she sells our former family home? While she currently receives an income from the house, the letting agents are rubbish and it is causing her much stress. I would like to find out if it is worth her while to invest the value of the property elsewhere as I assume that CGT will be payable by her beneficiaries when the house is eventually sold anyway.
Thanks

[maths]

CGT will be payable but not on the whole gain.

If she for example has owned the property for say 15 years and lived in it for say 10 years then 11.5/15ths of the gain is exempt from CGT. 3.5/15ths would be chargeable less a further exempt amount of 11,300.

If she also rented it out further relief is also available.

[AnthonyR]

The period she lived in the house is exempt. As is the following 18 months. So if she sells within 18 months of moving out then it's entirely exempt.

As she's been letting it, she will also get another relief - lettings relief, which will likely cover much of the gain if she sells it shortly after the 18 months. Once you move beyond the 18 months in very rough figures if she makes a further £40k lettings relief will cover it, the excess is likely to be taxable (although do the sums beforehand).

The other side is her beneficiaries - they will receive it at market value (albeit perhaps subject to IHT depending on the value) so if they sell it shortly after her death there will be no CGT.

[apc]

Thanks very much, she bought the house in the mid 80s when my parents split, but moved in with her partner about 20 years ago and the house will have increased in value considerably in the interim so I guess there'll be quite a sting. Probably worth her keeping things as they are. Cheers

[AnthonyR]

In that case - from a tax point of view and subject to there not being a substantial IHT cost, you are probably better off holding on to it and getting the CGT uplift on your mother's eventual death.

However, from a practical point of view, don't let the tax be the driver. If her life will be made significantly easier by just cashing in and having it actively managed with a regular(ish) income this may be a consideration.

If there is considerable IHT exposure it may be worthwhile taking the hit on CGT now and using BPR type investments to generate an income and mitigate the IHT.

[apc]

Thanks again