Is it a Good Idea to Sell an Inherited House and Upgrade our Shared-Ownership Flat to Full Ownership? | Property

Q My mother recently passed away, leaving my sister and me with equal shares in our family home. The house is currently being rented privately, and we each receive half of the monthly rent. My relationship with my sister is great. I have recently retired and paid off my mortgage for my shared-ownership. If we sell the family home, half of the profits would provide enough capital for my husband and me to fully own our flat. However, this would leave us with a limited nest egg. What should we do in this situation?

A Assuming that fully owning the flat means no longer paying rent for the portion we currently don’t own, selling our mother’s house seems like a reasonable option. If the amount we pay in rent exceeds the rental income we receive (after factoring in income tax), it would certainly reduce our monthly expenses. This could be particularly appealing considering our reduced income during retirement.

However, if the rent we pay is lower than the after-tax rental income we earn, the decision becomes less straightforward. It hinges on whether my sister and I are comfortable being long-term landlords and if we are willing to bear the costs of maintaining the property.

If we are not convinced about the long-term viability, it would be wise to discuss this with my sister and suggest selling the house once the current tenants vacate. It’s also worth considering that selling the property may trigger capital gains tax (CGT) if our share of the property’s appreciation from the inheritance date exceeds the CGT allowance, which is currently £6,000 for the 2023-24 tax year. In the previous tax year, the CGT allowance was £12,300, and it is set to decrease to £3,000 annually starting from the 2024-25 tax year.