I am inheriting a half share in a house and need advice

[GreenPetal94]

My granny sadly passed away and a while on my sister and I are inheriting her house (which has a rental tenant) in half share. Taxwise, I am not sure whether we should be setting up a business together to manage this or whether we just pay income tax on the rental income. After expenses we would make about £700 each per month from the rent. This extra income would not bring either of us over the higher rate tax limit (at the moment).

I have been googling about this and I can't find what I want to know, most likely because I am searching on the wrong thing. Can anyone give me some advice, even if just which type of forum I should visit.

Yes you would pay tax but you can deduct some expenses from the house from the income. It's not always straightforward as depending on if it's treated as capital or not. You and your sis will probably have to do a tax return to account for the income and expenses even though you aren't a higher rate taxpayer. There may also be capital gains tax when you sell.
It's a long time since I did any tax, so camt give you too much detailed advice. I suggest you could go to your local high st accountant who could probably give you some advise on how difficult it would be for you to do.

I have done tax return before. But someone suggested that if we run this as a company we would pay less tax. Seems unlikely but I would like to know.

I think this page from the DirectGov website on 'Record-Keeping for Landlords' probably answers a lot of your questions. Keeping track of allowable expenses will reduce your tax bill. Employing an accountant is a very good idea if you're not familiar with bookkeeping.

The first thing you need to do is decide the long term plan, then think about how you go about it. Are you agreed about keeping/selling, how long does this agreement go on for (one year, ten years?), what is the get-out process if (no, make that when ) one of you wants out, etc.

First of all get the house valued ASAP. If you sell the house in X years, you are only liable to capital gains tax on the difference in value between now and then, less any cash spent on improvements. If you have official baseline valuations it will make this a lot easier if and when you sell.

The rent is income, less upkeep expenses, so you need to declare this on a tax return, probably.

I asked a financial adviser this just two days ago, though I don't have the problem yet...

Thanks everyone, the directgov page is very helpful