Buying to sell

[Chimmychango]

Hi All

I am thinking of buying a property to renovate and sell. I am currently at the stage where i am researching all of the costs associated with buying and selling a property.

I am currently renting a property with my partner and the property i intend to buy is purely a project, in which i would like to complete and make some profit from when i sell the property, while still renting out the house i currently live in from my landlord.

One thing I would like to know is: Are any profits made from selling the property taxable via Capital Gains Tax?

Many Thanks

 

[RedHerring2]

The sale of your primary residence , that you have owned for three years, is not subject to CG tax.
If it's not your primary residence, then yes, it is subject to CG.

http://www.property-tax-portal.co.uk/taxarticle7.shtml

 

[skotl]

As RedHerring states, the property is subject to CGT. You don't get a discount for not owning any other property.

The three main ways to mitigate tax burdens are;

• 1. Live in the property for a while
  2. Own the property for an appreciable (years...) amount of time
  3. Be able to state genuine costs in re-development

It sounds like #3 is your best bet for mitigating tax bills. Go see a tax advisor asap, and they will tell you what is claimable and what evidence you need.

This is not expensive. My tax advisor shaved £6k off my bill and cost me £60 for the hour.

 

[SimonH2]

1. Live in the property for a while

For that, apparently the tax man will consider each case on it's merits. Things like making sure you are on the electoral roll, have your bank statements sent there etc will all count. In your case, if you stopped renting that that would be a pretty big point in your favour.

If you do have this property as your principal private residence (PPR) then I believe you can discount the final 2 years of ownership PLUS any time you lived in it against capital gains tax. Eg, if you lived in it for a year, then moved out and rented it, then sold it after 4 years, AIUI the rules, you'd be able to discount 3/4 of the capital gains.

There are rules about when you have to declare a change in PPR status, and the message I got when I took professional advice last year is that the tax man is a bit more cautious since the outing of MPs and their "flipping".

2. Own the property for an appreciable (years...) amount of time

Does it help ? There's no taper relief any more (I believe the ocular challenged scottish git scrapped that), so all your CG is lumped into one at the date you sell it. That's a bit of a downer for some of us - one of my colleagues dabbles in shares, and he could (in theory, he's well down at the moment ) make £10k/year without paying any CGT. On the other hand, if I sell the flat I've owned for 8 years, then I don't get to carry forward any previous unused CGT allowance, nor do I get any taper relief - so potentially I could be classed as a higher rate taxpayer even though I'm a loooong way from the higher rate threshold. What's more, under the original wording when this bit was slipped into a budget, hit the higher rate threshold by just 1p and the whole CGT would have been at the higher rate - they later changed it so only the part that goes over the threshold would count.