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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15705
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Me and my husband planning to buy property as an investment.

Customer Question

Hello,
Me and my husband planning to buy property as an investment. We would like to sell it and looking for profit of £10000-£20000 ( Property cost £15000 we would like to spend £10000 for renovation and looking to sell it for £35000-£45000). Both of us are employed. I do earn £16500 before tax and my husband around £14500 -£15500. We would like to know what would be the best option for us to buy it to sell in terms of tax. Should we buy together on under one name?
I would appreciate your help.
Kind regards
Karolina
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.
Would you be looking to hold on to the property for a while after renovation, perhaps letting it before selling or to sell as soon as the work was completed?
Customer: replied 1 year ago.
Hi,
We rather would like to sell it as soon as work is completed.
Expert:  TonyTax replied 1 year ago.
Thanks.
Leave this with me while I draft my answer.
Expert:  TonyTax replied 1 year ago.
Hi again.
If you made a profit of £20,000 between you, you would each pay tax of £2,000, Class 4 NIC of £174.60 (£10,000 - £8,060 x 9%) and Class 2 NIC of £145.60 (full year at £2.80 per week) on your respective £10,000 profit shares. The total tax and NIC bill between you would be £4,640.40.
If just one of you made a profit of £20,000, then the tax would be £4,000, the Class 4 NIC would be £1,074.60 (£20,000 - £8,060 x 9%) and the Class 2 NIC would be £145.60 (full year @ £2.80 per week). The total tax and NIC bill would be £5,220.20.
You would save £579.80 in NIC by buying the property together and operating as a partnership.
I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
hi
Just to clarify things, is the capital gain tax related to income tax? what I meant is since our annual tax allowance this year is I think around £10,000 each so if we make a profit of £20,000 I thought we shouldn't have to pay any tax since our profit of £20,000 fell below our combine annual tax allowance, which is why I am asking if our salaries are included while calculating the capital gain tax, I thought the capital gain tax has nothing to do with the salary? since is a tax on profit and I don't consider salary as a profit? Hope I'm making sense:)
Thanks for your clarifications
Expert:  TonyTax replied 1 year ago.
You are each using your £10,600 personal allowances against your salaries. You only get one personal allwoance each. When you are self-employed, you don't have a salary. The surplus of income over expenses is all profit.
If you buy a property with a view to renovating it quickly and then selling it, your profit will be subject to income tax and national insurance contributions and not capital gains tax.
If you let the renovated property for a year or so before selling it, you could each disclose your respective shares of the the profit as a capital gain and each claim the capital gains annual exemption of £11,100 against your respective shares of the profit.
Customer: replied 1 year ago.
hi again.
If I understood it correctly its better to let the property for more than a year in order to pay less tax on our profit? could you give us a detailed calculations of how much tax we should pay if we decide to let it for more than a year once renovated using the information we gave you about our salaries, thanks.
Expert:  TonyTax replied 1 year ago.
I'm not saying that HMRC won't try to say you are trading as property developers if you let the property for a year or so but it's less likely.
If you each made a capital gain of £10,000, you would pay no CGT. You each have an annual CGT exemption of £11,100 (current tax year) which would cover your respective gains.

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