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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I live in rented accomodation with my husband and children

Resolved Question:

Hi I live in rented accomodation with my husband and children and have inherited some money, enough to buy a small property but not enough for one for us all to live in. If I buy a property to do up and sell (hopefully for a prophet) are there any tax implications? I would then reinvest in property hopefully eventually a home that we can live in.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

If you buy a property specifically to refurbish and to sell for a profit as opposed to making it a home for your family, HMRC might say that you have traded as a property developer and charge any gain to Income Tax and National Insurance Contributions as opposed to Capital Gains Tax. This can be the case even if you are living in the property, though probably not if you take a long time to do it which most property developers don't. It's all about intention.

Take a look at the notes here for more information.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

so would i be better off letting it out once finished rather than selling? the property is a disused shop which has planning permission to convert to a 2 bed bungalow

Expert:  TonyTax replied 2 years ago.
That would be an option as you say that you cannot move your whole family into a property you can afford to buy with your inheritance. On a future sale, you would pay CGT at either 18% or 28% or a combination of the two rates depending on the level of your income.

If you make a profit through a quick refurbishment and sale, you would need an overall income in excess of £42,385 before you would pay income tax at 40%. Classes 2 and 4 NIC is charged on trading profits at the rates set out here. You would need to add any other income you may have in the same tax year that you sell a refurbished property.
Customer: replied 2 years ago.

so how do i notify them? I currently pay tax through paye, my husband doesn't work so would have his tax allowance to offset i guess?

Expert:  TonyTax replied 2 years ago.
You would need to register for self-assessment to disclose any rental income and capital gain or trading profit. You can do that using a form SA1 unless you register as self-employed in which case you start here.

Each part owner of a property would be entitled to exemption from CGT for the first £11,100 of gains they make in a single tax year.

The personal allowance is only deductible from income, not capital gains.
Customer: replied 2 years ago.

seems like a lot of hassle might just keep it in the bank! Thanks for your help

Expert:  TonyTax replied 2 years ago.
Thanks.

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