Just a quick thread to see if someone could shine some light on what seems to be a complicated area. My parents have their own house for sale, but also want to sell the house they inherited from my grandmother. They inherited her house around 2002 and since then rented it out to a family member for a nominal amount. However they have spent considerable amounts updating the property to its current high standard.

As things stand I understand that if they sell both properties Capital Gains Tax will be due on the property that is not their main residence. However if they sold their house and moved into the second house is there a timescale they would need to be at the address before it is classed as their main residence or if they sell each house in a different tax year ( april to april) would this suffice?

I know we will need to get expert advice but I just thought I would get a few opinions first

Thanks for your time in advance.

I will try and help with some of the points you have raised but it would also be beneficial to buy a book from taxcafe which helps you save various taxes on investment or second properties. It was very helpful for meand well worth the £25.

If your parent's can move into your Grandmother's house for a year or more and send HM Revenue & Customs a letter electing it as their new main residence (keeping a copy and the confirmation for records). They also need utility bills, council tax, bank account statements addressed there in case of a query at a later date.

This will help with Priciple Private Residence relief but they can also get lettings relief as long as HMRC were notified of the nominal amount of rental income. Read the book carefully, make notes and discuss any queries with an accountant who is knowledgable with both rental income taxation and Capital Gains Tax or you could be losing out.

As far as I am aware, the value of the house agreed for Probate purposes would be the base price for computing CGT profits. If the house is in both parent's names they can gat 2 lots of CGT allowance, and 2 lots of lettings relief.

This is very a very complicated form of taxation so please see a knowledgable accountant, not just a mate of a mate and the right person can save you a lot of money.

If the rental income has not been declared earlier for any reason, get the accountant to help you out asap and get it sorted. The benefits of the reliefs I mentioned will far outweigh any tax due on the nominal rental income.

Keep all the receipts for the repairs and improvements. Repairs are allowable against Rental Income and Improvements are allowable against Capital Gains Tax.

I hope this helps

ATM