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Ash
Ash, Solicitor
Category: Property Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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I bought a large house that I really couldn't afford on the

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I bought a large house that I really couldn't afford on the basis that I was going to demolish a third of it - sell the land and use the monies to pay off the mortgage and renovate the rest of the house. Having discussed the sale of the land with an estate
agent, they recommend that I sell the entire house and plot to a developer to build 4 townhouses on - one of which I could retain as my own dwelling. I only moved into the house 6 weeks ago and the size of the entire site is 30m x 30m. What are the tax implications
of this proposal.
Submitted: 1 year ago.
Category: Property Law
Expert:  Ash replied 1 year ago.
Hello my name is ***** ***** I will help you.
You would be liable for any gain as a result of this. So if for example it costs you £1m to build and you sold for £3m, you would have to pay tax on the profit - £2m.
You get a small tax free allowance that you would deduct but you would pay tax on the profit.
Can I clarify anything for you about this today please?
Alex
Customer: replied 1 year ago.
Surely this can not be right. I am not developing the land - I would be selling to a developer the land who will be spending his money and get the proceeds of the sale of the three other houses. I believe that at the end of the deal I would be left with a town house that cost approximately £200k to build but may have a market value of around £400k and be paid about £400k for the land . I bought the house for £501k and have £176k mortgage on it - which I pay £864pcm on. I will be living in the new townhouse once built for a long time.
Expert:  Ash replied 1 year ago.
Oh I see, I misunderstood. If you are selling the land on and retaining a house there would be no implications for you. This is because you are selling in effect the land to someone else. That is tax free. Then as long as you stay in your house for 3 years, there is no gain if and when you ever sell it.
Does that clarify?
Alex
Customer: replied 1 year ago.
Not quite. Just to be absolutely clear - I am selling the land and the house to the developer who would give me a townhouse (one of four that he would be building on the site - the existing house would be demilished) and £400k .
Customer: replied 1 year ago.
That was meant to say existing house will be demolished .
Expert:  Ash replied 1 year ago.
As long as its your main residential home and has been for 3 years, there is no tax.
Alex
Customer: replied 1 year ago.
So as long as I live in the townhouse once built there would be no capital gains tax liability and the fact that I have only just bought the house so hace lived in it for a short period before the development took place has no implications on capital gains.
Customer: replied 1 year ago.
Are you able to clarify as per my previous question
Thanks
Expert:  Ash replied 1 year ago.
Correct. Assuming this has and is your sole home for the last 3 years.
Alex
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