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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4098
Experience:  FCCA FCMA CGMA ACIS
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My mum has bought a ramshackle house from friends to enable

Customer Question

My mum has bought a ramshackle house from friends to enable them to move into care. She has now decided to renovate it and sell it on.
My best guess is, after buying, renovating & legal costs she can only hope to make a profit of £20k max.
her income is well below £10k/annum.
What,if any tax will she be liable to pay on the sale of the house.
KB
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

This is a moot point over which experts on this site have differing opinions. There are two scenarios depending upon which way the HMRC cat jumps!

The first is that, presuming your mother has not lived in the house, that she will be assessed for Capital Gains Tax (CGT) on the profit of 20K. In round figures she has an annual allowance of 10K so that leaves a further 10K liable to CGT. This would be at 18% = GBP 1.8.

The second and often favoured by HMRC is to asses your mother as trading in property, thus subject to Income Tax (IT). That would translate into 20K plus her annual other income taxed at 20% (up to a taxable income of GBP 31865) after her personal allowance of 10K. Without more data I cannot calculate this exactly.

I do hope I have thrown some light on your mother's tax position.
Customer: replied 3 years ago.


Thanks for this.


Prompt and clear


KB

Expert:  bigduckontax replied 3 years ago.
Pleased to be of assistance. Please be so kind as to rate me for my services.