Sale of Main property tax question

[trando]

My elderly mother is selling her house to go and live with my sister who has the room to accommodate her. She needs some very limited care and the detached 4 bed house she is living in on her own is getting a bit much for her. The house has no mortgage on it and is worth c£600k. She plans to put the money into savings so if she does need more advanced care, she has the readily available funds to pay for it.
I am trying to find out what if any tax liability would be due if she does this. HMRCs website doesn't seem to consider this option, and searching online produces conflicting info.
Has anyone else encountered this before or have experience of it and if so what do I need to check for?

[randlemarcus]

As long as its her principal residence, the proceeds are tax free. This is quite clear - what conflicting advice have you found?

[trando]

I assumed also that as her main residence there would be no tax liability. However, a friend's IFA said that a better option would be the keep the house to preserve it as an asset (maybe rent it out) because the inheritance tax liability would be less than if she sold it and banked the cash? She is still very much alive but we have to consider the inheritance tax position at some point...

[scot_aln]

I believe the IHT threshold increases if property is part of that inheritance

https://www.gov.uk/inheritance-tax

Renting out doesn't always go to plan if you get unlucky with tenants

[C69]

OP, one thing to bear in is that even if your mother sells her house, her estate may still be able to claim the residence nil rate band for inheritance tax purposes.

As explained here: https://www.gov.uk/guidance/how-downsizing-selling...

[BoRED S2upid]

So no tax on the property sale. Likely to be tax on the interest earned with that much in the bank earning a good chunk and then inheritance tax further down the line but she can give you all lots of gifts you should read up on this. Anyone getting married?

[Actual]

On death the mothers estate will be liable for inheritance tax at 40% where it is above the IHT allowance.

The IHT allowances are £325K personal plus £175K residence nil rate band RNRB where property is left to direct descendants (children) and everything over £500K will be liable to IHT at 40%. If mother was married then husbands £325K can count and if husband was father then the £175K also counts and so the total IHT allowance could be £1M.

If the estate is in savings which came from the proceeds of a house sale then the RNRB still applies.

Sounds like the IFA advice is a bit off.

The above is not advice and may not be explained well or completely correct but if you investigate further all we become clear eventually.

There is a budget in October and all bets are off.

[trando]

Thanks for all the comments. Under the circumstances, it is probably best to see what the Chancellor announces in the budget and make some decisions after that.

[alscar]

I doubt the budget will do anything to penalise your Mother if she sold her house today for instance as the money could then be invested elsewhere and either way she would pay no additional tax given what has already been said on here as whether Property or Savings she would still receive the same monetary allowance (£500k)in the event of her sad demise.
All I would say is that the Budget is not likely to increase allowances ( it is more likely to either reduce them / potentially increase the rate of IHT although I think that’s less likely ).
My point is that even if that happens we don’t as yet know what effective date that will be from.
So either way that’s a really tricky call for her / you and it may well be that she decides what makes her more at ease with whatever solution she chooses.