When the kids leave home we were thinking of converting it into two flats one for us and one either for them or us to rent out. We just wondered what the tax would be on the rental income if we did this and would it be best to share the utilities or have separate ones.

I assume that at present you own the whole house. Therefore if you split it into two flats and rent out one flat, you will receive the rental income, and pay tax on it. If you made your (over 18) children partial owners of the rental flat, then you could divert the rental income to them, per www.hmrc.gov.uk/manuals/pimmanual/PIM1030.htm. It requires: (a) a written agreement between you and them before you start diverting to them; and (b) their portion of the rental income actually goes into a bank account in their name. It is best to have separate utility accounts.