House Sale, Elderly Mum going into rented for 1 year, Tax
Discussion
Hi all,
My Mum is going to (most likely) be going into rented for 12 months after her house sale goes through.
I have looked very briefly into what Tax she'd pay on the proceeds of the sale, or rather money in the Bank earning interest.
Let me suggest £250k that she comes out with, after moving costs etc, so what would she pay HMRC at the end of each January?
It was her only house, no other property involved, lived there 2 years. No 'profit' compared to purchase price. Never had a buy-to-let ever and no renting of rooms out either.
Mum is retired, in her 70's.
Prior to that she and my Dad lived in 2 houses in last 21 years, if that has any bearing on figures.
She has savings, not sure how much, lets say £50k.
So she'd have circa £300k sat in the bank.
Would she get her Personal Allowance of circa £12.5k she'd pay no Tax on, then have to pay 20% Tax on the Interest of the remaining £287,500?
Am I miles out? Just getting her some basic figures together.
Thanks in advance and apologies if this is simple stuff, but I thought I'd go here first.
My Mum is going to (most likely) be going into rented for 12 months after her house sale goes through.
I have looked very briefly into what Tax she'd pay on the proceeds of the sale, or rather money in the Bank earning interest.
Let me suggest £250k that she comes out with, after moving costs etc, so what would she pay HMRC at the end of each January?
It was her only house, no other property involved, lived there 2 years. No 'profit' compared to purchase price. Never had a buy-to-let ever and no renting of rooms out either.
Mum is retired, in her 70's.
Prior to that she and my Dad lived in 2 houses in last 21 years, if that has any bearing on figures.
She has savings, not sure how much, lets say £50k.
So she'd have circa £300k sat in the bank.
Would she get her Personal Allowance of circa £12.5k she'd pay no Tax on, then have to pay 20% Tax on the Interest of the remaining £287,500?
Am I miles out? Just getting her some basic figures together.
Thanks in advance and apologies if this is simple stuff, but I thought I'd go here first.
Countdown said:
Does she have any other income?
General rule of thumb
1. Add together all her income
2. Deduct her personal allowance
3. Deduct her savings allowance
4. She pays 20% tax on the remainder
This.General rule of thumb
1. Add together all her income
2. Deduct her personal allowance
3. Deduct her savings allowance
4. She pays 20% tax on the remainder
If she only has state pension, which is under £12570, she'll be able to earn the balance between her pension and £12570, plus another £6000 interest on top.
If as Twig says, that she only has State pension and no other incomes so she is under the £12,570 threshold, then the starter savings rate applies.
She could (for example) put £145,000 into a 1 year fixed savings bond* and receive just under £6k in interest each tax year and not pay tax on that.
Also £20k in this year's ISA if not used, plus another £20k ISA in the new tax year in April.
Maximum into Premium bonds would be another £50k, which would leave £15k from the £250k house sale, which the interest would be taxed at 20%.
Depends on where the other £50k she already has is saved. If it's already in ISAs and she hasn't opened one this tax year, then she'd only be charged tax in the interest on the last £15k. Otherwise it could be taxed on the interest on £65k which could be around £520 (20% of £2,600 interest assuming 4%). Maybe if the £50k is in a poor rate savings account, then the interest could be very small anyway (say £500 on a 1% rate).
It also depends on how this '1 year' falls. If the house sale is imminent, then some of the interest will fall in this tax year and she may have bought the new place before the end of the 2026-2027 tax year, so the interest might be less overall in that tax year.
Also with savings rates dropping, the amount in non-ISA savings could be increased and not exceed £6k interest received in each tax year.
The FSCS protection limit is higher if the funds are from a house sale, but this is time limited (I think for 1 year, but please check).
She could (for example) put £145,000 into a 1 year fixed savings bond* and receive just under £6k in interest each tax year and not pay tax on that.
Also £20k in this year's ISA if not used, plus another £20k ISA in the new tax year in April.
Maximum into Premium bonds would be another £50k, which would leave £15k from the £250k house sale, which the interest would be taxed at 20%.
Depends on where the other £50k she already has is saved. If it's already in ISAs and she hasn't opened one this tax year, then she'd only be charged tax in the interest on the last £15k. Otherwise it could be taxed on the interest on £65k which could be around £520 (20% of £2,600 interest assuming 4%). Maybe if the £50k is in a poor rate savings account, then the interest could be very small anyway (say £500 on a 1% rate).
It also depends on how this '1 year' falls. If the house sale is imminent, then some of the interest will fall in this tax year and she may have bought the new place before the end of the 2026-2027 tax year, so the interest might be less overall in that tax year.
Also with savings rates dropping, the amount in non-ISA savings could be increased and not exceed £6k interest received in each tax year.
- £145,000 at 4.11% in a fixed 1 year savings bond with Atom as of this evening's rates. However, the FSCS limit is £120,000, so would recommend splitting the £145,000 across more than one bank, also ensure that existing savings don't share the same FSCS licence.
The FSCS protection limit is higher if the funds are from a house sale, but this is time limited (I think for 1 year, but please check).
OldSkoolRS said:
If as Twig says, that she only has State pension and no other incomes so she is under the £12,570 threshold, then the starter savings rate applies.
She could (for example) put £145,000 into a 1 year fixed savings bond* and receive just under £6k in interest each tax year and not pay tax on that.
Also £20k in this year's ISA if not used, plus another £20k ISA in the new tax year in April.
Maximum into Premium bonds would be another £50k, which would leave £15k from the £250k house sale, which the interest would be taxed at 20%.
Depends on where the other £50k she already has is saved. If it's already in ISAs and she hasn't opened one this tax year, then she'd only be charged tax in the interest on the last £15k. Otherwise it could be taxed on the interest on £65k which could be around £520 (20% of £2,600 interest assuming 4%). Maybe if the £50k is in a poor rate savings account, then the interest could be very small anyway (say £500 on a 1% rate).
It also depends on how this '1 year' falls. If the house sale is imminent, then some of the interest will fall in this tax year and she may have bought the new place before the end of the 2026-2027 tax year, so the interest might be less overall in that tax year.
Also with savings rates dropping, the amount in non-ISA savings could be increased and not exceed £6k interest received in each tax year.
The FSCS protection limit is higher if the funds are from a house sale, but this is time limited (I think for 1 year, but please check).
Remembering if her income is under 50k, she will get £1000 tax free allowance on interest.She could (for example) put £145,000 into a 1 year fixed savings bond* and receive just under £6k in interest each tax year and not pay tax on that.
Also £20k in this year's ISA if not used, plus another £20k ISA in the new tax year in April.
Maximum into Premium bonds would be another £50k, which would leave £15k from the £250k house sale, which the interest would be taxed at 20%.
Depends on where the other £50k she already has is saved. If it's already in ISAs and she hasn't opened one this tax year, then she'd only be charged tax in the interest on the last £15k. Otherwise it could be taxed on the interest on £65k which could be around £520 (20% of £2,600 interest assuming 4%). Maybe if the £50k is in a poor rate savings account, then the interest could be very small anyway (say £500 on a 1% rate).
It also depends on how this '1 year' falls. If the house sale is imminent, then some of the interest will fall in this tax year and she may have bought the new place before the end of the 2026-2027 tax year, so the interest might be less overall in that tax year.
Also with savings rates dropping, the amount in non-ISA savings could be increased and not exceed £6k interest received in each tax year.
- £145,000 at 4.11% in a fixed 1 year savings bond with Atom as of this evening's rates. However, the FSCS limit is £120,000, so would recommend splitting the £145,000 across more than one bank, also ensure that existing savings don't share the same FSCS licence.
The FSCS protection limit is higher if the funds are from a house sale, but this is time limited (I think for 1 year, but please check).
But I agree it is definitely possible to spread the cash across tax free accounts (ISA/PB's) to reduce the tax liability in the first place.
Cats_pyjamas said:
Remembering if her income is under 50k, she will get £1000 tax free allowance on interest.
But I agree it is definitely possible to spread the cash across tax free accounts (ISA/PB's) to reduce the tax liability in the first place.
I've already accounted for that in the £6k starter savings rate (£1k tax free allowance, plus the £5k starter savings rate) for the money put into savings from the house sale. But I agree it is definitely possible to spread the cash across tax free accounts (ISA/PB's) to reduce the tax liability in the first place.
Can't add another £1k for the tax free allowance as well, though it would be nice.
OldSkoolRS said:
I've already accounted for that in the £6k starter savings rate (£1k tax free allowance, plus the £5k starter savings rate) for the money put into savings from the house sale.
OP hasn’t answered the question”any other income” question.Also worth him looking at benefit entitlements, such as Attendance Allowance.
Sheepshanks said:
OP hasn t answered the question any other income question.
Also worth him looking at benefit entitlements, such as Attendance Allowance.
Yes I agree, hence the 'if' she only has State pension in my earlier post. I guess the OP can extrapolate to suit the actual situation if they don't want to discuss actual amounts and if the OP's Mum has a taxable income over £12,570. There are examples of the starter savings rate on the Gov website which show how exceeding the £12,570 allowance will affect the tax on interest. Basically £1 off the £5k allowance for every £1 of taxable income above £12,570.Also worth him looking at benefit entitlements, such as Attendance Allowance.
alscar said:
The FSCS protection limit is higher if the funds are from a house sale, but this is time limited (I think for 1 year, but please check).
6 months and up to the new limit of £1.40m I believe.
Useful to know Alscar, so in the OP's case the plan of 1 year will be too long for the higher protection limit and my suggestion of splitting any amount over £120,000 from any individual bank/licence applies.6 months and up to the new limit of £1.40m I believe.
As a matter of interest, how much is your mum receiving from her State Pension. Many people's State Pension is now a higher annual amount than their Persnal Tax Free Allowance. In other words, the annual State Pension amount they receive is higher than £12,570.
This is because the State Pension is rising inexorably due to the infamous "triple lock" whilst the Persnal Tax Allowance is frozen and does not increase each year,.
Your mum might be liable to Income Tax on her State Pension alone.
This is because the State Pension is rising inexorably due to the infamous "triple lock" whilst the Persnal Tax Allowance is frozen and does not increase each year,.
Your mum might be liable to Income Tax on her State Pension alone.
Are you going to be looking after these balances and returns for her ? Because you may find that she has neither the interest nor the aptitude to be dealing with FSCS limits and multiple accounts and tax free returns and deposits versus bonds.
If you are going to be doing it, then consider doing all of it, and deal with her tax return too.
If you are going to be doing it, then consider doing all of it, and deal with her tax return too.
Newc said:
Are you going to be looking after these balances and returns for her ? Because you may find that she has neither the interest nor the aptitude to be dealing with FSCS limits and multiple accounts and tax free returns and deposits versus bonds.
If you are going to be doing it, then consider doing all of it, and deal with her tax return too.
Good points - at the same time also need to make sure LPA ( Finance ) is organised and in place if not already. If you are going to be doing it, then consider doing all of it, and deal with her tax return too.
Gassing Station | Finance | Top of Page | What's New | My Stuff