Person going into care renting home out to cover care costs

anniem
anniem Registered Posts: 1,326
Had the following email from a client:

"Just wondered if you may be able to advise me on the following. Unfortunately my *relative has had to be taken into care and we are hoping to be able to rent her home and use the money from the rent to cover part of her care costs. Do you know if this would be taxable or not,if so any idea how much hmrc would take."

I know the basic answer to the tax on let property part of the question and the amount taxable would depend on all the variables, BUT I wonder if they need better advice covering various other aspects that aren't raised in the initial email.

I think this is one I need to ask for more specialist advice on, as I feel I don't know enough to cover the other variables in this situation. Can anybody help, please?

Anna
FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire

Comments

  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    I can't see how this would be treated any different for any property rental. The income would be taxable, along with any other income from the person who owns the property.
  • anniem
    anniem Registered Posts: 1,326
    Thanks TC, I realise that, perhaps I was thinking too much into it. I have answered the email and said exactly as you've said, but what I feel I'm missing out on is any other advice or suggestions outside the scope of the original question, ie assessing long term feasability, property -v- care options etc., future IHT planning (which I'm not capable of) and things like that. Sometimes I feel I'm only scraping the surface of something, and this is one of those times.

    I have suggested that they sort out a Power of Attorney, because I'm not sure if the person going into care still has all their faculties, and also that they sort out details of all bank accounts, incomes, savings, shares, etc to cover the eventuality that a Tax Return will be required in due course. Also, to make sure they know where Wills, Property Deeds are kept and details of the relative's solicitors.

    As I say, perhaps I think beyond the boundaries of the questions being asked, it's just me. Dotting i's and crossing t's, if you like (I know the apostrophes probably weren't right there :lol: )
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    When you go into talk of IHT planning, I think a solicitor is the person to talk to. I think you have done all that you can until they check out the legal possibilities.
  • jamesm96
    jamesm96 Registered Posts: 523
    I agree with the general consensus re. the rental - the client will be taxed just like anyone else.

    Re the IHT, though, I'm not a big fan of solicitors for this sort of thing. There are plenty of tax-planning companies who'll have products that might suit, and they usually have a fixed-fee structure. I've had some dealings with a firm called Granite Tax who seem farily decent, though my client is yet to give the go-ahead on their plan. There's also a firm called Mulberry Hamilton who a colleague of mine has used for a couple of tax planning assignments.

    However, before you go to far down the IHT planning route, do just check whether the estate would even be liable - is the estate more than £325k, or if married, is the joint estate more than £650k? If it's not then the IHT planning is all a moot point.

    Cheers,

    Mike.
  • anniem
    anniem Registered Posts: 1,326
    Thank you TC and Mike. I'l just do what I can then!
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
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