The choices are theoretically quite easy - you can either sell the place or keep it. In practice, things are never quite so simple.
Sorting out any initial tax liabilities is a useful start. Inheritance tax may apply to a person's estate on death, if its total value is more than pounds 150,000. The tax rate is 40 per cent above that amount.
So if the house is worth more than pounds 150,000 the first thing you may be facing is a bill from the Inland Revenue. You have 12 months to pay it. If it is worth considerably less, you could sell some of the estate's other assets to help meet your tax liability.
Once over that hurdle, you still have to decide what to do. Selling should be fairly simple. Contact an estate agent, take advice on a likely price and put it on the market.
If you decide to keep the house, you may want to rent it out. The amount you can charge depends on its location and condition. Assume between 6 and 10 per cent of its value in rent each year.
You can either rent out a property yourself or find a managing agency to do it, but you will pay up to 10 per cent a year to your agent. And you can't always be sure that they are good at finding a clean, honest and trustworthy tenant who won't trash the house. If you have doubts, ask to speak to one of their satisfied clients.
Renting the house will leave you with an income tax bill. You can deduct the cost of maintenance, repairs and even the agent's fees after it has been rented. But any work carried out before the tenants move in is not deductible. If you want to live in the house while renting out a room, you do not have to pay tax on rent of up to pounds 3,250. But the house must be your only or main residence.
Should you get fed up with renting the property out and decide to sell it after all, unless it has become your principal residence beware another sting in the tail. You will be liable for capital gains tax on any increase in the value of the house between the moment at which it was valued for probate and when you sell it.
So, forget any dream about being able to hold on to the property and make loads of money as it increases in value over the years. The taxman will once again be first in line for a slice.
Nor will you get away without paying capital gains if you sell it right away - unless it has not gone up in price at all.
Leaflets and pamphlets on capital gains and inheritance tax are available from any Inland Revenue office. Or write to Capital Taxes Office, Minford House, Rockley Road, London, W14 0DF, tel 071-603 4622.Reuse content